Treasury yields spiked across the curve Wednesday as traders adjusted to expectations for a Donald Trump presidency.

The benchmark 10-year yield (US10Y) (TBT) (TLT) rose 15 basis points to 4.43%. It's now up more than 70 basis points since the Fed started its easing cycle in September by cutting 50 basis points.

The 2-year yield (US2Y) (SHY), more closely tied to fed funds futures, rose 7 basis points to 4.26%.

See how bonds are trading across the curve.

The FOMC starts its two-day meeting today and expectations are still a near-certainty of a quarter-point rate cut on Thursday. But the odds of a similar cut in December have fallen below 70%.

Looking further out, fewer cuts are priced in for 2025, with traders now betting on a terminal rate for that year of 3.75%, just 1 full percentage point from current levels, reached by June.

Much of the focus is on Trump's plans for tariffs, which could stall the progress made on inflation. The latest headline PCE index showed inflation just above the Fed's 2% mandate, with core PCE at 2.7%.

"We are revising up our forecast for inflation and the federal funds rate in response to President Trump’s clear victory in the presidential election," Pantheon Macro economist Samuel Tombs said. "The scope for tax cuts and a much larger budget deficit in 2026 remains unclear given that the race to control the House is finely balanced, but we can now be almost certain that tariffs on imports will be imposed next year."

"For now, we assume that a 10% tariff will be applied to all imports, boosting the core PCE deflator by about 0.8pp, though the range of potential outcomes is very wide," Tombs said. "This would leave core inflation close to 3% by the end of next year, essentially unchanged from 2.7% in September."

"The risks are skewed to the upside, given that Mr. Trump has threatened a 20% tariff on all imports except those from China, which would be hit by a 60% tariff. In this scenario, the core PCE deflator likely would be boosted by about 2.0pp."

"In the past, the Fed has looked through adverse supply shocks, but with core PCE inflation now unlikely to return to the 2% target and households’ medium-term inflation expectations still above target-consistent rates, it will have to change course this time," Tombs added. "That said, October’s jobs report shows that the trend in payroll growth has continued to weaken, and much of the Trump agenda, including migration curbs, threaten to depress trend GDP growth and reduce the medium-term neutral interest rate."

More on yields and the election

• Trump trade in full swing
• Market And Economic Insights From October 2024
• SA Sentiment: Debt is the top economic issue