Traders withdraw expectations for a 2026 Federal Reserve rate cut and hedge against possible rate hikes

U.S. Treasury prices fell, and after the Bank of England stated it would address inflation, traders no longer expect the Federal Reserve to cut rates this year, and are even hedging for possible rate hikes in the coming months. The two-year U.S. Treasury yield rose by 13 basis points to 3.9%. Tom di Galoma, Managing Director at Mischler Financial Group, said that expectations for the Bank of England to raise rates by 50 basis points in 2026 drove the market shift, and the decline in the European bond market also pushed up U.S. yields. He pointed out that capital flows are mainly driven by selling, and market sentiment is affected by expectations of prolonged conflict.