Moves in short-term interest rates suggest the market has underestimated the Federal Reserve's ability to hike rates this year, BlackRock's chief investment strategist for fixed income said Tuesday.
The U.S. 2-year Treasury hit a roughly three-week high of 0.82 percent on Tuesday. That is a sign investors now believe they became too complacent in their opinion the Fed would not deliver two 25-basis-point increases this year, BlackRock's Jeff Rosenberg said.
"This is a Fed that is still talking about two increases and the bond market barely has 18 basis points priced in for the entirety of 2016," he told CNBC's "Squawk on the Street."
Rosenberg said the risk that investors underestimated the Fed was underscored on Tuesday by data that showed consumer prices in April recorded their biggest gain in three years.