Waller sees more Fed hikes, with traders favoring a 5.4% 10-year yield this year

Federal Reserve Governor Christopher Waller said on Oct. 8 that more rate hikes would likely be needed to bring inflation down to the Fed’s 2% target. He also left open the possibility of pausing at the October meeting, according to a report by Reuters via MarketScreener.

Traders still favor the 10-year Treasury yield reaching 5.4% this year. That expectation climbed from near even to likely on Oct. 7, after falling from likely to near even the previous day. Waller’s remarks came after that jump and do not explain it. Reuters linked the rise to higher oil prices as traders weighed a storm threatening U.S. Gulf energy production and Houthi attacks on Saudi Arabia.

The yield question has swung over the past week: expectations eased from Oct. 1 through Oct. 3, rebounded on Oct. 5, then slipped on Oct. 6 before the sharp rise the next day. The official Treasury yield was 5.22% on Oct. 8, below 5.4%. The Associated Press reported that the yield briefly reached 5.36% during Oct. 7 trading, but an intraday quote alone does not confirm that the threshold was reached; the Treasury’s published daily 10-year rate must reach 5.4%.

The move extends a run of concern about borrowing costs. Earlier coverage pointed to Federal Reserve minutes saying most officials considered another rate increase likely this year, as well as oil-supply worries. Waller’s comments add nuance: more hikes remain possible, but a pause has not been ruled out. Across the related yield thresholds, traders’ bets put the high around 5.47%, with most estimates between under 5.4% and 5.89%; reaching 5.5% is close to a toss-up, while 5.7% remains unlikely.

The next major test is the consumer price report on Oct. 14, followed by the October Fed meeting on Oct. 27–28. Hot inflation or further energy-supply concerns could add pressure on yields, while softer data or strong demand at Treasury auctions could ease it. The question turns on whether the Treasury’s official daily 10-year rate reaches 5.4% on a qualifying date.