Bond Market Shift Puts Pressure on Risk Assets Amid Rate Hike Expectations

The latest jobs report from the Federal Reserve has sent shockwaves through bond markets, causing traders to aggressively reposition their bets on interest rate hikes. The May 2026 report showed a stronger-than-expected increase in nonfarm payrolls, with 172,000 new jobs added and a 4.3% unemployment rate.

This unexpected growth has led to a significant shift in market expectations, with CME FedWatch and prediction markets now placing the odds of at least one rate hike in 2026 at around 50-60%. This increase in hawkish sentiment is driving up Treasury yields, with ten-year yields climbing to 4.47%.

The implications for crypto investors are significant, as risk aversion takes hold and Bitcoin ETFs experience billions in outflows. Traders navigating this environment should be watching the July FOMC statement closely for any signals of a hawkish pivot from the new Fed Chair, Kevin Warsh.