US bond markets rattled by Fed interest rate hike talk

WASHINGTON (Sept 12)  US government debt prices traded lower on Monday, as talk of a U.S. Federal Reserve interest rate hike coming as soon as this month rattled investors.

The yield on the benchmark 10-year Treasury note sat higher at around 1.6888 percent, while the yield on the 30-year Treasury bond was also higher at 2.4044 percent. Bond yields move inversely to prices.

The German 10-year bund yield hit a session high of 0.058 percent, its highest level since June 23. It has since pared some of those gains and was last sitting near 0.039 percent.

Atlanta Fed President Dennis Lockhart delivered a speech in which he said a "serious discussion" on raising rates is warranted at the central bank's upcoming meeting.

On Friday, U.S. markets closed sharply lower, with all three major indexes posting their worst day since June 24, 2016, when the U.K. voted to leave the European Union.

The sharp plunge in U.S. equities on Friday however was due to concerns that the U.S. central bank could raise interest rates as soon as this month, following comments made by key Fed officials.

Boston Fed President Eric Rosengren said in a speech that low interest rates are increasing the chance of overheating the U.S. economy. Gradually tightening monetary policy is appropriate to maintaining full employment, he added.

Fed Governor Lael Brainard is expected to give a speech at the Chicago Council on Global Affairs at 1.15 p.m. ET, with the topic expected to be about the economic outlook and on monetary policy implications.

Will we get a washout for stocks in September?


The poor performance from U.S. markets on Friday added pressure to markets across the world, with both Asia-Pacific indexes and European markets tumbling on Monday due to Fed jitters.

While the Fed has given a jolt to markets worldwide, oil is expected to add an extra dampener onto markets, with crude futures posting solid losses on Monday.

Futures were lower on the back of increased oil drilling activity in the U.S., Reuters reported. U.S. West Texas Intermediate last stood around $45.29 per barrel, while Brent hovered around $47.43.

No major economic data is expected to be released on Monday.

On Monday, the U.S. Treasury is set to auction off $40 billion in 13-week bills and $36 billion in 26-week bills. The U.S. Treasury is also expected to auction $24 billion in three-year notes and $20 billion in 10-year notes. It is also expected to announce the size of a four-week bill auction, set to take place on Tuesday.

—CNBC's Fred Imbert and Gina Francolla contributed to this report.