Traders raise expectations for Federal Reserve interest rate hikes, with a 50% chance of an increase as early as October.

Odaily reports that, due to signs of a stalemate in peace talks between the United States and Iran, U.S. Treasury prices have fallen amid concerns that high energy costs will exacerbate inflation and prompt the Federal Reserve to raise interest rates. Monday's sell-off pushed yields on the $31 trillion U.S. Treasury market higher, with the 10-year Treasury yield rising about 6 basis points to nearly 4.5%, while oil prices climbed more than 7%.

The two-year Treasury yield, which is most sensitive to expectations regarding Federal Reserve policy, also increased about 6 basis points to 4.07%. Previously, Iran suspended indirect talks with the United States in protest against Israeli actions. Traders have raised their expectations that the Federal Reserve’s next move will be an interest rate hike. Swap markets show that traders have fully priced in one rate hike by March 2027 and see a 50% chance of a hike as early as October. (Golden Ten Data)