The swaps market is now pricing the Fed's policy rate to peak at just 4.85% by May.
The Fed has raised rates four times since March.
The Russian invasion in Ukraine has traders believing a quarter-point increase is more likely.
Traders see a quarter-point move as the most likely scenario.
Traders see a greater likelihood that the Fed will start tightening with the first half-percentage-point increase since 2000.
Benchmark yields climbed across the curve, led by the 10-year, rising as much as 11 basis points.
Wall Street is betting that the next rate hike cycle will be very short.
A full hike is fully priced into the Fed's September meeting.
Just before the Fed meeting, eurodollar futures are pricing in the first rate hike around March 2023.
Leveraged investors have never had a bigger bet on losses in bond futures