The yield on the US 10-year Treasury note climbed to 4.5% on Monday, its highest level in roughly two weeks, while the more policy-sensitive 2-year yield rose above 4.2%, reaching its highest point since February 2025. As investors returned from the long weekend, they refocused on the outlook for monetary policy and inflation, even as signs of progress in US–Iran negotiations helped drive another decline in oil prices.
Futures markets are now pricing in at least one 25-basis-point Federal Reserve rate hike by year-end, with the probability of a move as early as September hovering around 50%. Attention is turning to Thursday’s PCE report, which includes the Fed’s preferred inflation gauge and is expected to offer fresh insight into underlying price pressures and the likely trajectory of interest rates.
