What’s Up – or Not Up -- with Bond Yields?
Currently, the 10-year bond yield is at 4.22%, the same level it was on January 16th when oil prices were about $59! What?
From its low this year on January 6th of $55, WTI crude oil futures prices have surged to as high as almost $120 on March 8th and are currently near $99. The S&P GSCI total U.S. Commodity Price Index has exploded higher this year by almost 35% from its low in late December and is currently at its highest level since June 2022 (and only 12% below its peak level in March 2022) when the annual rate of CPI inflation reached 9.1%. To add insult to injury, the February PPI report -- for the “month before” the Iran conflict -- released yesterday morning showed that the PPI final demand price index rose by 0.7% last month, its biggest increase since last July while the annual rate rose to 3.4% from just 2.9% in January.
The Polymarket probability of no Federal Reserve rate cuts in 2026 has similarly surged from 3.4% at year-end to currently 26.6% -- its highest level of the year. When this year started, most on Wall Street expected at least two Fed rate cuts, but now zero may be the consensus and some are even suggesting the Fed may need to hike rates again. Inflation has quickly taken center stage as the Iran conflict shows no signs of ending soon.
Curiously, despite intensifying inflation fears, the bond market has remained rather chill. The 10-year Treasury bond yield is little different than it was at year end (i.e., 4.22% vs. 4.17%). What’s Up – or Not Up – with Bond Yields?
