The yield on 10-year US Treasury bonds rose on Tuesday, extending its gains for a seventh straight session and hitting a 19-year high, after breaking through the psychological barrier of 5% for the first time since October 2023.
Global oil prices are currently trading near their highest levels in four months, which is likely to increase inflationary pressures on monetary policymakers at the Federal Reserve.
Markets are currently pricing in a 92% probability that the Federal Reserve will raise US interest rates by about 25 basis points this week to counter rising inflationary pressures in the United States.
US Treasury yield
The yield on 10-year US Treasury bonds rose by about 0.6% to 5.027%, its highest level since July 2007, from an opening price of 4.998%, and hit a low of 4.983% during the session.
The yield rose 0.6% on Monday, its sixth consecutive daily gain, amid rising inflationary pressures in the United States.
global oil prices
Oil prices traded near four-month highs on Tuesday, with Brent crude approaching the $110-a-barrel mark for the first time since last May.
The latest jump in oil prices this week comes after vital Saudi oil facilities were attacked by the Houthi group, fueling concerns about the safety of global energy supplies.
This is in addition to the US and Iran exchanging attacks targeting oil tankers in the Strait of Hormuz and the Arabian Gulf.
Federal Reserve
The Federal Reserve's monetary policy meeting begins later today, with decisions expected tomorrow, Wednesday. Expectations strongly favor a 25 basis point interest rate hike, the first increase in US interest rates since July 2023, along with the release of further evidence regarding the development of inflation in the country and the path of interest rates in the coming period.
US interest rate
According to the CME Group's FedWatch tool: The probability of the Federal Reserve keeping interest rates unchanged at this week's meeting is currently priced at 8%, and the probability of a 25-basis-point rate hike is priced at 92%.
The probability of the Federal Reserve keeping interest rates unchanged at its December meeting is currently priced at 1%, while the probability of a roughly 25-basis-point rate hike is priced at 99%.
The Federal Reserve's quarterly economic projections statement, due to be released on Wednesday, is expected to provide further clues about the future path of U.S. interest rates.
