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

Odaily Planet Daily News As signs of a stalemate in peace talks between the United States and Iran emerge, U.S. Treasury prices fell amid concerns that high energy costs could 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 10-year yield rising about 6 basis points to nearly 4.5%, while crude oil prices rose more than 7%.

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