US 10-Year Treasury Yield at One-Month High

The yield on the US 10-year Treasury note held around 4.68% on Thursday after climbing nearly 10 basis points in the previous session, as the Federal Reserve kept interest rates unchanged, though three FOMC members dissented in favor of a rate hike. Chair Kevin Warsh also stressed that the decision to keep rates steady should not be viewed as a sign of policy inertia, adding that markets would continue to chart their course based on incoming economic data. In the Middle East, the US was reportedly carrying out fresh air strikes on Iran following attacks on American forces in the region. Meanwhile, both sides remained unable to reach a potential agreement as Tehran insisted on maintaining control of the Strait of Hormuz, leaving investors concerned about inflation and the outlook for interest rates. Elsewhere, the Bank of England and the Bank of Japan are also widely expected to leave interest rates unchanged this week.

The yield on the US 10-year Treasury note increased to 4.66% on Wednesday after the Fed left the federal funds rate unchanged, broadly in line with expectations, despite markets assigning roughly a one-in-three probability to a rate hike. However, three FOMC members dissented in favor of a 25bps increase. During the regular press conference, Chair Warsh did not provide much guidance but said the central bank "where necessary and appropriate, will not hesitate to act” and that higher rates “could well be part of the solution" to remedy too-high inflation. Markets currently assign roughly a 54% probability of a rate hike, lower than nearly 80% before the decision. Looking further ahead, around two additional quarter-point rate hikes remain fully priced in by the middle of next year. Meanwhile, oil prices resumed their upward trend as hostilities in the Middle East intensified.

The yield on the US 10-year Treasury note rose to 4.65% on Wednesday as investors awaited the Federal Reserve’s upcoming policy decision, with policymakers widely expected to leave interest rates unchanged. However, markets continue to price in about a one-third chance of a 25-basis-point rate hike, reflecting an unusually high level of uncertainty this close to a policy meeting compared with recent years. Traders also assign roughly an 80% probability to a rate increase in September, reinforcing expectations that borrowing costs could remain elevated. Investors also monitored rebounding oil prices and renewed inflation concerns after fresh hostilities flared in the Middle East. The US military said it had successfully intercepted what it described as a surprise Iranian attack targeting US troops stationed across the Middle East, reigniting regional tensions.