Treasury yields climb as fear grows that Fed rate cuts are off the table
Why it matters: Investors face a hawkish Fed and rising yields, signaling higher borrowing costs and market volatility.
- Treasury yields climbed across the board, with the 10-year adding 10 basis points to 4.38% and the 2-year note also up 10 basis points to 3.932%, reflecting growing investor concern over Fed policy.
- Investors are now positioning for a more hawkish Fed stance, with Baird investment strategist Ross Mayfield noting that the market has "removed basically every rate cut from this year, and now is pricing odds of the hike."
- The Federal Reserve's rate-setting committee voted 11-1 to keep rates unchanged, a widely anticipated move, but the conflict's impact on global oil prices and labor market uncertainty are shaping a less friendly domestic economic backdrop.
- Oil prices traded lower on Friday, with U.S. West Texas Intermediate down 1.2% to $94.99 and Brent crude down 1.3% to $107.28, after Treasury Secretary Scott Bessent indicated sanctions on Iranian crude could be lifted, and Israeli Prime Minister Benjamin Netanyahu confirmed assistance to reopen the Strait of Hormuz.
Treasury yields surged as escalating Middle East tensions and persistent inflation fuel investor fears that the Federal Reserve may not cut rates this year, with some now even pricing in a potential hike. This hawkish shift comes despite a dip in oil prices following hints of eased Iranian oil sanctions and efforts to reopen the Strait of Hormuz.
