US Treasury yields climbed broadly on Wednesday, as investors focused on the upcoming Federal Reserve interest rate decision and a press conference from Chair Kevin Warsh. A sharp jump in international oil prices also added to bond market volatility.
The benchmark 10-year Treasury yield, a key gauge of US government borrowing costs, rose 2 basis points to 4.624%. The policy-sensitive 2-year yield increased 3 basis points to 4.308%, while the long-term 30-year yield was largely unchanged at 5.10%. (Note: Bond yields move inversely to prices.)
The Federal Open Market Committee (FOMC) is expected to hold interest rates steady within the 3.5% to 3.75% range. However, according to the CME Group's FedWatch Tool, markets have priced in a 76% probability of a rate hike in September.
Despite recent cooling in inflation data, rising energy prices and renewed US-Iran tensions have complicated the decision-making environment for Fed Chair Warsh. Since Warsh took over the Fed's helm, inflation has persistently exceeded the 2% target since 2021. As a broad measure of inflation, the US Consumer Price Index (CPI) unexpectedly fell in June, bringing the annual rate down to 3.5%. However, in the weeks following that data, oil prices surged again, driven by escalating conflict in the Middle East.
Energy prices spiked further on Wednesday after President Trump stated he would "hit Iran hard" in response to attacks. US West Texas Intermediate crude futures rose 6.9% to settle at $89.88 per barrel. Late Tuesday evening, US Central Command reported that Iran had launched ballistic missiles at US forces in the Middle East. In a statement posted on social media platform X, the command indicated the attack originated from Iran but that all missiles were successfully intercepted.
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Editor: Zhang Jun SF065
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