U.S. Treasury yields rose on Wednesday as investors waited for the Federal Reserve's interest rate decision and chair Kevin Warsh's press conference. The rate-setting committee is expected to hold rates at 3.5% to 3.75%, with markets pricing a 76% chance of a September hike instead. A 6.9% jump in crude oil after Iran's missile attack on U.S. forces has complicated the picture.
Yields on U.S. government debt rose Wednesday, hours before the Federal Reserve's interest rate decision and the press conference with chair Kevin Warsh, with the 10-year Treasury note climbing more than 3 basis points to 4.641%. The 10-year is the key benchmark for U.S. government borrowing.
The 2-year note, which tracks short-term Fed policy more closely, was up more than 4 basis points at 4.324%. Meanwhile, the 30-year bond yield gained 2 basis points at 5.116%, and yields and prices move in opposite directions.
Fed expected to hold, with traders looking to September
Markets expect the Federal Open Market Committee to leave rates unchanged at the range of 3.5% to 3.75%. Traders are instead pricing in a 76% chance of a September hike, according to the CME Group's FedWatch tool. But higher energy prices and renewed tensions with Iran have complicated the picture for Warsh, despite cooler inflation data.
An oil spike cuts against a softer CPI print
Warsh took over a Fed that has seen inflation exceed its 2% target since 2021. Yet the consumer price index posted an unexpected decline last month, bringing the annual inflation rate down to 3.5% in June. In the weeks that followed, oil prices jumped again amid the escalating conflict in the Middle East.
Energy prices spiked again Wednesday after President Donald Trump told a Fox News reporter that the U.S. will be hitting Iran hard in response to the surprise attacks. West Texas Intermediate crude futures advanced 6.9% to trade at $89.88 a barrel.
Iran targeted American forces in the Middle East with ballistic missiles, U.S. Central Command said late Tuesday. Centcom said in a post on X that the attack originated from Iran, but that all missiles were intercepted.
Source: CNBC
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