U.S. Treasury prices have extended their decline, hitting new session lows. This move follows comments from Federal Reserve Governor Waller, who indicated that policymakers may need to raise interest rates in the near term if underlying inflation continues to show broad-based price pressures.

In the short end of the market, pricing in interest rate swaps now suggests approximately a 50% probability of a Federal Reserve rate hike at its July meeting, following Governor Waller's remarks.

Yields across the Treasury curve have increased by 4 to 6 basis points on the day, with the yield curve experiencing a bear flattening. The short and intermediate segments of the curve are leading the decline.

Current swap pricing indicates a premium of about 13 basis points for a July rate hike. The market is now pricing in roughly 45 basis points of cumulative tightening by year-end, an increase from the 38 basis points priced in at the close of trading last Friday.