TREASURY YIELDS RISE AS FED RATE HIKE BETS INCREASE

United States Treasury yields rose on Tuesday as traders increased their expectations for Federal Reserve interest rate increases. The 10-year Treasury yield, a key benchmark for US government borrowing, reached 4.6278% in early trading. The 2-year Treasury note yield climbed to 4.2900%, whilst the 30-year bond yield rose to 5.1093%. These movements came ahead of testimony from Federal Reserve chair Kevin Warsh before Congress and the release of June inflation data later in the session.

Market movements reflected shifting expectations around monetary policy following geopolitical developments. According to the CME's FedWatch tool, traders now see a 42.2% chance of a Federal Reserve rate increase on 29 July—up from 26.7% a week prior. The same tool recorded a 33.6% probability of another rate rise by April next year. Oil prices rose sharply, with West Texas Intermediate futures gaining 2.84% to $80.36 per barrel and Brent crude jumping 3.12% to $85.90, following statements from President Donald Trump regarding Iranian port blockades and fees on cargo through the Strait of Hormuz.

Warsh will testify before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday. Inflation data due later Tuesday showed consensus forecasts expecting annual inflation to ease to 3.8% from 4.2% in May, whilst core inflation—excluding food and energy—was predicted to remain at 2.9%. Market participants indicated these upcoming events would be closely monitored for signals regarding Federal Reserve policy direction.