Traders raise expectations for Fed rate hike, with a 50% probability of a rate hike as early as October

Odaily Planet Daily News Due to signs of a stalemate in peace negotiations between the United States and Iran, U.S. Treasury bond prices fell, as worries mount that high energy costs will exacerbate inflation and prompt the Federal Reserve to raise interest rates. Monday’s sell-off pushed yields higher across the $31 trillion U.S. Treasury market, with the yield on the 10-year note rising about 6 basis points to nearly 4.5%, while crude oil prices rose more than 7%.

The yield on the two-year Treasury note, which is most sensitive to expectations for Fed policy, also rose about 6 basis points to 4.07%. This came after Iran suspended talks with the U.S. through intermediaries to protest Israel's actions. Traders have increased their bets that the Fed's next move will be a rate hike. The swaps market indicates 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. (Jin10)