Traders Raise Fed Rate Hike Expectations, 50% Probability of Rate Hike as Early as October

Odaily News Due to signs of a deadlock in peace negotiations between the United States and Iran, U.S. Treasury prices fell as concerns grow that high energy costs will exacerbate inflation and prompt the Federal Reserve to raise interest rates. Monday's sell-off pushed up yields in the $31 trillion U.S. Treasury market. Yields on 10-year notes rose about 6 basis points to nearly 4.5%, while crude oil prices surged over 7%.

The two-year Treasury yield, most sensitive to expectations for Fed policy, also rose about 6 basis points to 4.07%. This followed Iran's suspension of talks with the U.S. through intermediaries to protest Israeli actions. Traders have raised expectations that the Fed's next move will be a rate hike. Swaps markets indicate that traders have fully priced in one rate hike by March 2027 and see a 50% probability of a rate hike as early as October. (Jin Shi)