U.S. markets price in four Fed hikes by June 2027 as bitcoin drops below $83,000

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Fed hikes, bitcoin below $83K

Highlights

Futures now price four additional Federal Reserve hikes, implying a 4.75%-5% funds rate by June 2027 after this month's expected increase.
U.S. Treasury 20-year and 10-year yields have risen sharply to near 5.5% and above 5.1%, sending TLT ETF to record lows below $80.
Dollar index has risen above 101, bitcoin tumbled below $83,000, gold fell 25% from January's high, and yen weakened back to 159 per dollar.

Rate path and bond market repricing

As reported by CoinDesk, traders are increasingly positioning for a longer period of restrictive Federal Reserve policy, with CME FedWatch showing a 4.75% to 5% federal funds range as the most likely outcome for June 2027. That implies four quarter-point increases from the current 3.75% to 4% range, after the Fed already raises rates by 25 basis points this month.

The repricing is visible across the U.S. Treasury curve. The 20-year yield is approaching 5.5%, pushing the long-bond ETF TLT to all-time lows below $80, while the 10-year yield stands above 5.1%, a level last seen in 2007.

Borrowing costs are also under pressure outside the U.S., with government bond yields rising in France, Germany, the UK and Japan. The move suggests investors are adjusting to a global backdrop of firmer rates and persistent funding needs.

Dollar strength weighs on crypto and gold

Higher yields and a stronger dollar are weighing on risk assets. The dollar index has climbed above 101, up 3% this year, while bitcoin has slipped below $83,000 from a local high of $87,500 and gold remains just above $4,200, down 25% from its January all-time high.

Several factors are pushing Treasury yields higher. The U.S. economy remains strong, with the S&P Global composite PMI for manufacturing and services rising nearly 4.3% to 58.4 in September and beating expectations.

At the same time, Middle East tensions are making the inflation outlook less certain and contributing to higher oil and diesel prices. Heavy borrowing to fund AI infrastructure is also increasing the supply of bonds competing with Treasuries for investor demand, adding to upward pressure on yields.

The Japanese yen continues to weaken against the U.S. dollar and is back at 159 per dollar, reversing much of its recovery from around 153 after reported U.S. and Japanese intervention last month. Markets are now watching whether the prospect of further Fed hikes continues to lift yields and extend the dollar's advance.

In our earlier coverage of the jump in global government borrowing costs, we explained how investors pushed U.S. and Japanese yields higher as markets repriced the outlook for Federal Reserve policy. We also noted that higher energy prices and geopolitical risks were adding to inflation uncertainty, intensifying fiscal pressure and keeping the yen and broader risk sentiment under strain.

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