Traders raise expectations for Federal Reserve rate hikes, with the earliest possibility of a rate increase in October at 50% likelihood

Golden Finance reports that signs of a deadlock in peace negotiations between the United States and Iran have caused U.S. Treasury prices to fall, with concerns that high energy costs will exacerbate inflation and prompt the Federal Reserve to raise interest rates. Monday's sell-off led to a rise in yields across the $31 trillion U.S. Treasury market, with the 10-year Treasury yield increasing about 6 basis points to nearly 4.5%, while oil prices rose over 7%.
The two-year Treasury yield, which is most sensitive to Fed policy expectations, also increased about 6 basis points to 4.07%. Previously, Iran suspended talks with the U.S. through intermediaries to protest Israeli actions. Traders have increased expectations that the Fed's next move will be a rate hike. The swap market shows that traders have fully priced in a rate hike by March 2027 and believe there is a 50% chance of a rate hike as early as October. (Jin10)
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