US 2-Year Yields Hit 4.76% as Fed Hike Odds Surge to 56%
Bond markets tighten as Fed rate hike probability jumps to 56%, while oil eases on supply hopes.
Key points
- US 2-year yields hit 4.7604% as the chance of an October Fed rate hike rose to 56%.
- South Korea’s tech index gained 1.1% while Brent crude fell 0.2% to $103.68 per barrel.
- French bond risk premiums reached their widest since the euro zone crisis, weighing on the euro.
US 2-year Treasury yields climbed to 4.7604%, marking a 36 basis point rise over two weeks. This sharp increase reflects market expectations that the Federal Reserve will hike rates again in October.
The probability of a rate hike in October reached 56%, with a year-end move now considered certain. Bond traders are pricing in further tightening as nominal consumer spending grows at 6.3% annually.
Asia Equities Rise on AI Demand
Asian stock markets edged higher on Monday as artificial intelligence demand supported chipmakers. South Korea’s tech-heavy index gained 1.1%, while MSCI Asia-Pacific shares rose 0.3%.
Japanese futures rose 0.5% despite the Nikkei index being closed for the Silver Week holiday. The dollar remained steady at 157.00 yen as investors monitored potential Bank of Japan intervention.
Oil Prices Ease Amid Supply Hopes
Brent crude dipped 0.2% to $103.68 per barrel as hopes for Saudi supply increases emerged. US crude followed suit, falling 0.3% to $100.02 despite recent geopolitical tensions.
Saudi Arabia aims to restart flows through its damaged East-West pipeline soon. CBA analysts estimate global oil inventories could deplete in five to ten weeks, down from previous forecasts of fifteen to twenty weeks.
Bond Markets Face Deficit Concerns
Risk premiums on French government debt spiked to their widest level since the euro zone crisis. German debt faces pressure after Chancellor Friedrich Merz’s party recorded its worst election results since 1949.
The euro held flat at $1.1477 after shedding almost 1% last week. Rising yields in the US also pressured gold, which eased 0.2% to $4,370 per ounce.
