The yield on the US 10-year Treasury note hovered around 4.06% on Wednesday after rising for two straight sessions, as mounting worries that a protracted conflict in the Middle East could keep energy prices elevated stoked fresh inflation concerns. Traders pared back expectations for Federal Reserve rate cuts, now largely anticipating the next move in September rather than July, although markets still foresee two 25-basis-point reductions this year.
The US–Israeli war on Iran entered its fifth day, with Israel on Tuesday striking a building where clerics were meeting to choose a new Supreme Leader. President Donald Trump warned that the attacks could usher in a new Iranian leadership no less troubling than the previous regime, highlighting the high degree of uncertainty surrounding the conflict’s eventual outcome.
Notably, the usual safe-haven rush into government bonds failed to materialize, as inflation fears outweighed investors’ appetite for defensive assets.
