The US economy added 172,000 jobs in May, roughly double what economists expected. That triggered a violent sell-off in Treasuries and a rapid repricing of Fed policy. Traders now fully price in a 25 basis point rate hike before the end of 2026 - not a cut, but a hike.
The 2-year Treasury yield jumped 13 basis points to 4.17%, while the 10-year yield climbed above 4.53%. Market pricing shows a 60-70% probability of a Fed hike at the October or December meeting.
Risk assets took the hit. The Nasdaq dropped nearly 3%. Bitcoin fell below $61,000, continuing the pattern from early April when strong March jobs data similarly crushed rate-cut expectations. Now traders are pricing in the opposite direction entirely.
Higher rates mean traditional fixed-income offers increasingly attractive yields. When a 2-year Treasury yields 4.17% with zero credit risk, the bar for holding volatile assets gets meaningfully higher. DeFi and stablecoin yields become less compelling against risk-free alternatives above 4%.