Iran Halts Talks, U.S. Bonds Decline as Traders Increase Expectations for Fed Rate Hike

ME News reports that on June 1 (UTC+8), U.S. Treasury prices fell amid signs of a stalemate in peace negotiations between the U.S. and Iran, as investors worried that elevated energy costs would exacerbate inflation and prompt the Federal Reserve to raise interest rates. Monday’s sell-off pushed yields higher in the $31 trillion U.S. Treasury market, with the 10-year yield rising approximately 6 basis points to nearly 4.5%, while oil prices climbed more than 7%. The two-year yield, most sensitive to Fed policy expectations, also rose about 6 basis points to 4.07%. This followed Iran’s suspension of talks with the U.S. via intermediaries in protest of Israel’s actions, leading traders to increase 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. (Source: BlockBeats)