US Treasuries slipped on Monday, as elevated oil prices dampened expectations of aggressive rate cuts ahead of this week’s Federal Reserve meeting.
Yields briefly eased in afternoon trading—alongside a dip in crude—after The Wall Street Journal reported that Iran was seeking to end its conflict with Israel. But the bond selloff resumed as equities rallied, with yields rising between two and six basis points across maturities.
Oil prices remain well above pre-conflict levels, fuelling fears that inflation could stay higher for longer and prompt the Fed to strike a more cautious tone.
The two-year Treasury yield climbed about two basis points to 3.97%, as traders trimmed expectations for Fed easing—now pricing in around 45 basis points of cuts by year-end, down from 49 basis points on Friday.
Attention turns to the Fed’s two-day policy meeting beginning Tuesday. While rates are widely expected to remain unchanged, markets will be closely watching the updated “dot plot” of economic and rate projections. In March, Fed officials had forecast two cuts for 2025.
