Iran Pauses Talks, US Bond Yields Drop, Traders Raise Rate Hike Bets

BlockBeats News, June 1st, as signs of a deadlock emerged in the peace talks between the United States and Iran, U.S. Treasury prices fell. People are concerned that the high energy costs will exacerbate inflation and prompt the Federal Reserve to raise interest rates.

Monday's sell-off led to a rise in yields in the $31 trillion U.S. Treasury market, with the yield on the 10-year Treasury rising by about 6 basis points to nearly 4.5%, while the price of crude oil rose by over 7%. The yield on the two-year Treasury, which is most sensitive to Fed policy expectations, also rose by about 6 basis points to 4.07%. Earlier, Iran suspended talks with the United States through intermediaries in protest of Israeli actions. Traders increased their expectations that the Fed's next move would be a rate hike.

The swap market shows that traders have fully priced in one rate hike by March 2027 and see a 50% probability of a rate hike as early as October.