Bond Traders Relish Idea of Fed Rates Above 4% as Chance to Get Yield

The specter of US interest rates at 4% or even higher is bringing into sharper focus the question of when and how investors should really get back into bonds after Treasury markets suffered one of their worst beatings in decades.

Hotter-than-expected inflation means traders are now betting the Federal Reserve will lift its benchmark as high as 4.5% early next year as officials seek to tame price pressures. If that comes to pass, it could help pull large parts of the Treasury curve back up to levels unseen in more than a decade and offer a tempting running yield at a time when riskier assets such as stocks could be coming under additional pressure.