The yield on the US 10-year Treasury note held around 4.06% on Wednesday after rising for two consecutive sessions, as concerns that a prolonged Middle East conflict could keep energy prices elevated fueled inflation fears. Traders scaled back expectations for Federal Reserve rate cuts, now pricing in the next reduction in September instead of July, though two 25 basis point cuts are still anticipated this year. The US-Israeli war on Iran entered its fifth day, with Israel striking a building where clerics were meeting to elect a new Supreme Leader on Tuesday. President Donald Trump voiced concern that the attacks could bring a new Iranian leadership as troubling as the previous regime, underscoring the conflict’s uncertain outcome. Notably, the typical safe-haven demand for bonds failed to emerge, as inflation worries outweighed appetite for defensive assets.
