US Treasury yields retreated in session trading, yet the market’s pricing for Federal Reserve policy remains anchored by escalating geopolitical risks in the Middle East.
While bond prices gained ground, traders are maintaining a significant probability of an emergency rate increase later this week.
20% by April, reflecting persistent inflationary pressures linked to the conflict.
Fed funds futures currently price a 36% chance of a rate hike on Wednesday.
The derivatives market also implies the benchmark interest rate could climb to approximately 4.20% by April, reflecting persistent inflationary pressures linked to the conflict.
This stands in contrast to the Fed’s recent decision to hold rates steady last month, though policymakers had signaled that a hike was possible later in the year if conditions warranted.
The repricing reflects a tug-of-war between domestic macroeconomic data and external shocks.