U.S. Treasury Yields Rise to 4.68%, Fed Rate Hike Probability Soars to 38%

The U.S. Treasury market is sending warning signals to the Federal Reserve (Fed). Rising Treasury yields, driven by soaring international oil prices and inflation concerns, reflect the market's expectation that the Fed Chair may pursue additional rate hikes. On the 26th, the yield on the U.S. 10-year Treasury note reached 4.68%, nearing its highest level in the past decade. This surge is attributed to a spike in international oil prices triggered by geopolitical risks in the Middle East. Brent crude briefly exceeded $100 per barrel, raising concerns about inflation. According to the CME FedWatch, the likelihood of the Fed raising the benchmark interest rate by 0.25 percentage points in this meeting has jumped from 13% to 38%. Conversely, the probability of a rate freeze has decreased to 62%. The U.S. government anticipates a significant issuance of Treasury bonds to cover an estimated $2 trillion budget deficit for the fiscal year 2026, while major tech companies are also issuing substantial corporate bonds to build AI data centers. The rise in interest rates is putting pressure on the stock and digital asset markets, with the Nasdaq index falling by 2.1%. Going forward, international oil prices and the geopolitical situation in the Middle East are expected to play crucial roles in the Fed's policy decisions.

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