Traders have never been more convinced of a September rate hikeby the Federal Reserve.

The chances of an interest-rate increase next monthreached 52 percent Wednesday, up from just 38 percent just two daysearlier. What fueled the change of heart? Hawkish comments from FedBank of Atlanta President Dennis Lockhart on Tuesday and asurprisingly strong report on U.S. service-sector growthWednesday.

“I'm more convinced that they're going to raise in September,”said Christopher Sullivan, who oversees $2.4 billion as chiefinvestment officer at United Nations Federal Credit Union in NewYork. “The market has come around to that view, by a slimmajority.”

That's helped drive bond yields higher before the week'smain event, Friday's monthly report on unemployment and wages fromthe Labor Department. Fed officials have said that they will needsigns of some further improvement in the jobs market before theyraise rates.

Benchmark 10-year Treasury yields rose five basis points to 2.27percent Wednesday.

The Fed has held its target for the federal funds rate atvirtually zero since December 2008 to bolster economic growth. Thelikelihood of a Fed increase is based on the assumptionthat the effective fed funds rate will average 0.375 percent afterthe first increase.

Bloomberg

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.