Traders have moved decisively away from anticipating any Federal Reserve rate cuts, with the latest inflation report pushing the market toward a higher probability of a rate hike.
The shift reflects a sharp repricing of policy expectations following the release of data showing persistent inflationary pressures.
The US 10-year Treasury yield climbed 12 basis points in the session, while the 2-year yield rose 15 basis points, signaling a steeper yield curve and a more hawkish outlook for monetary policy.
The move aligns with broader market reactions, as investors recalibrate their assumptions about the Fed’s path forward.
The recent inflation report adds to a growing body of evidence that central bankers may need to maintain tighter policy for longer.
This follows the Reserve Bank of Australia’s decision to raise rates for the third consecutive time in its fight against inflation, as well as the April FOMC minutes that revealed internal Fed divisions over the timing of potential rate cuts.