FX.co ★ Treasury Yields Move Higher as Oil Prices Fuel Inflation Concerns

The yield on the US 10-year Treasury note climbed to 4.68% on Monday, its highest level so far this month, as rising oil prices intensified inflation concerns. Crude prices rose against a backdrop of mounting uncertainty over a potential US–Iran agreement to end the war and reopen the Strait of Hormuz, with any near-term deal now appearing increasingly unlikely. Higher oil prices have fueled worries that renewed inflationary pressures could compel the Federal Reserve to keep interest rates elevated for longer, despite recent indications of a cooling labor market following Friday’s weaker-than-expected jobs report. Investors are now focused on this week’s US CPI and PPI releases for further insight into inflation dynamics. Market pricing currently implies about a 46% chance of a Fed rate hike in September, down from roughly 64% a week ago, while the probability that rates remain unchanged stands at around 54%.