The Fed left interest rates unchanged at the FOMC meeting, as was widely expected. However, the after-the-meeting narrative did not provide investors any consolation regarding current fears that increased oil prices might be reflected in inflation, which will force central bankers to even increase interest rates this year. Fed Chair Powell refused to comment directly on such a possibility, holding to the Fed’s projection of one rate cut till the end of this year. Eventually, this was not enough for investors, which started to sell US Treasury bonds, bringing the 10Y yields to the level of 4,39% on Friday. The last time yields were at this level was July 2025.
As long as oil prices remain elevated, the markets will continue to price effects of increased inflation to the economy. This means further corrections in the value of equities, gold and elevated long-term Treasury yields. A strong move in yields, as seen on Friday, might impose some short term reversal in the week ahead, but not too much. Charts are pointing toward the 4,31% as a probable level. However, it should be considered that during this time, markets will strongly react to any news related to the war in Iran and oil prices, in which sense, fundamentals will drive the markets in this period. In this sense, yields could also go even higher from the Fridays level, where even 4,4% could be potentially tested.