Officially, the Federal Reserve's rate-setting committee has yet to decide whether to raise benchmark interest rates when it meets later this month. But investors have largely made up their minds that a long-awaited liftoff from historically low rates is in store, placing a record $26.6 billion in bets that five-year U.S. Treasury notes will react to a rate hike in December, the Wall Street Journal reported.

Wagers on Treasury futures implied an 80 percent chance that the Fed would announce a rate hike on Dec. 16. The Fed hasn't tightened monetary policy since 2006.

The bets being placed by hedge funds, money managers and other investors on Treasury futures reflect the tight relationship between benchmark interest rates and bonds. When interest rates rise, investors move more of their money to cash. Accordingly, bond prices fall and yields rise.

Because markets try to anticipate the Fed’s moves in this way, some of the immediate effects of a rate hike on ordinary borrowers will be dampened in the short run. New mortgages, for example, are pegged to 10-year Treasury bond prices. So even if the Federal Open Markets Committee lifts rates by the expected 0.25 percent this month, potential new home buyers shouldn’t worry about sharply rising mortgage costs.

In recent speeches, Fed Chair Janet Yellen has sketched a positive portrait of the U.S. economy, citing firm jobs numbers and relatively strong consumer sentiments. Other Fed officials, including St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart, have indicated this week that they are ready to vote for a rate hike.