The global bond sell off continued Friday as long-run yields hovered around their multiyear highs and U.S. investors raised their bets the Federal Reserve will hike interest rates at its meeting next week.

The Labor Department reported that the consumer price index report held steady at 3.4% in August, matching economist expectations. However, a firmer than expected measure excluding volatile food and energy prices came in higher than expected.

The U.S. 2-year yield, sensitive to expectations for short-term interest rates, ended the week at 4.642%. Earlier in the session the yield rose as high as 4.644%, the highest level since July 2024.

The 10-year Treasury edged down after the CPI print but picked back up in midday trading to levels near 5%. The 10-year yield rose 0.191 percentage point to 4.974% this week.

Odds for a rate hike climbed to nearly 90% for the Fed's September interest rate meeting, according to CME's FedWatch tool. A month ago, those odds were nearly split. Consumer sentiment data for September also fell near all-time lows as households' economic mood was soured by high gasoline prices.

"Warsh has said that he wants the FOMC to engage in a "good family fight", the unambiguous message from the price data means there is likely to be broad agreement about a vote to hike with few, if any, members dissenting," wrote Stephen Brown, chief North America economist at Capital Economics.

Capital Economics now estimates the PCE deflator rose by 0.27% month-over-month in August.

Elsewhere in global yield markets, the German 10-year bund yield now sits around 3.502% from a 15-year high of 3.515%. The U.K. 10-year Gilt yield sits around 5.347% after hitting a 19-year high of 5.381% on Thursday.

Although rising yield levels look increasingly attractive for many investors, caution is warranted until yields settle, Christoph Rieger, head of rates and credit research at Commerzbank, said in a note.

"We maintain a cautious duration stance as the [bond] market is struggling to establish a new range, while oil prices stay under pressure and central banks stick with their laissez-faire attitude toward rising bond yields," Rieger said.

Oil prices could stay elevated, possibly preventing bond yields from falling meaningfully in the near term. Brent crude ended the week at $104.65 a barrel.

Iran-backed Houthi militants seized the strategic port city of Mokha on Yemen's west coast Thursday, further expanding their control near the Bab al-Mandeb chokepoint for energy exports through the Red Sea. That threatens to disrupt Saudi oil exports while shipping via the Strait of Hormuz is still dangerous and limited due to fighting between the U.S. and Iran.