After last Friday's US consumer price index report pushed the market-implied probability of a Federal Reserve rate hike to roughly 90%, rate strategists at Citigroup, Goldman Sachs, and JPMorgan have all shifted to anticipating a potential rate increase this week. These institutions, along with TD Securities, have joined a growing list of Wall Street dealers in predicting the Fed will announce a hike on September 16th.

Simultaneously, multiple firms have raised their year-end forecasts for US Treasury yields. In early Monday trading in New York, the 10-year Treasury yield breached the 5% threshold for the first time since 2023, fueled by rising oil prices. US WTI crude surged nearly 5% to its highest level since May.

Strategists at Goldman Sachs have lifted their year-end projection for the 10-year yield from 4.40% to 4.75%, while TD Securities has adjusted its forecast upward from 4.25% to 4.75%. In a report dated September 11th, strategists including TD Securities' Gennadiy Goldberg noted that given the market has already substantially priced in a Fed rate hike, yields are not expected to spiral significantly out of control due to the magnitude of the move. However, unless economic conditions deteriorate, yields should generally remain elevated through 2027.

Strategists at the Bank of Montreal have also indicated they have tempered their bullish outlook on the 10-year Treasury, now expecting a year-end yield of 4.6%. They stated that the possibility of a decline to 4.0% before year-end is no longer on the table. The bank maintains its medium-term optimistic view on US Treasuries as an asset class, but its near-term targets have become less aggressive than before.