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Meanwhile, the yield on the 30-year Treasury bond increased by less than 2 basis points to approximately 5.15%.<\/p>\n\n\n\n
One basis point equals 0.01 percentage points. Bond yields move in the opposite direction from bond prices.<\/p>\n\n\n\n
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Middle East Tensions and Oil Prices Pressure Bonds<\/strong><\/h2>\n\n\n\nGeopolitical uncertainty remained a major influence on financial markets after the U.S. Central Command carried out an 11th consecutive night of strikes against Iran.<\/p>\n\n\n\n
Speaking at an ASEAN foreign ministers\u2019 meeting in the Philippines, U.S. Secretary of State Marco Rubio questioned whether Tehran was approaching peace negotiations seriously. He indicated that the United States remained open to genuine discussions but would take necessary measures to defend its interests and those of its allies if negotiations failed to progress.<\/p>\n\n\n\n
The latest escalation also extended the rally in oil prices, which finished Wednesday roughly 3% higher. Rising energy costs can add to inflationary pressure, potentially giving the Federal Reserve more reason to maintain a restrictive monetary policy.<\/p>\n\n\n\n
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Markets Reassess the Possibility of a Fed Rate Hike<\/strong><\/h2>\n\n\n\nExpectations for another interest rate increase have strengthened following recent inflation data and the renewed rise in oil prices.<\/p>\n\n\n\n
Deutsche Bank strategist Jim Reid noted that the implied probability of a July rate hike had recovered to 26% by Tuesday\u2019s close. That was the highest level since the latest U.S. Consumer Price Index report came in below expectations.<\/p>\n\n\n\n
Before the CPI report, the probability had been as high as 45%. It dropped to around 10% following the inflation release before beginning to climb again.<\/p>\n\n\n\n
Money markets are now assigning approximately a 34% chance that the Fed will raise rates this month. Traders are also pricing in a 78% probability of at least one quarter-percentage-point increase by the September meeting, according to the CME FedWatch Tool.<\/p>\n\n\n\n
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Investors Await the Latest U.S. Economic Data<\/strong><\/h2>\n\n\n\nAttention will now turn to Friday\u2019s preliminary S&P Global U.S. Purchasing Managers\u2019 Index report.<\/p>\n\n\n\n
The report tracks activity across the manufacturing and services sectors and could provide additional clues about the health of the U.S. economy. Stronger-than-expected results may reinforce expectations that the Fed has room to keep interest rates elevated or raise them further, while weaker data could reduce the likelihood of additional tightening.<\/p>\n\n\n\n
Expectations for another interest rate increase have strengthened following recent inflation data and the renewed rise in oil prices.<\/p>\n\n\n\n
Deutsche Bank strategist Jim Reid noted that the implied probability of a July rate hike had recovered to 26% by Tuesday\u2019s close. That was the highest level since the latest U.S. Consumer Price Index report came in below expectations.<\/p>\n\n\n\n
Before the CPI report, the probability had been as high as 45%. It dropped to around 10% following the inflation release before beginning to climb again.<\/p>\n\n\n\n
Money markets are now assigning approximately a 34% chance that the Fed will raise rates this month. Traders are also pricing in a 78% probability of at least one quarter-percentage-point increase by the September meeting, according to the CME FedWatch Tool.<\/p>\n\n\n\n
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