Markets brace for Fed rate hike as Treasury yields hit 17-year peak

US Treasury yields reached their highest since 2007 and oil prices neared four-month highs as markets nearly priced in a Federal Reserve rate increase on Wednesday.

• The US 10-year Treasury yield rose to 5.03%, its highest level since 2007, as investors demanded higher returns amid inflation concerns.
• Oil prices climbed above $108 per barrel after Houthi forces in Yemen launched a new wave of attacks on Saudi Arabia.
• CME FedWatch showed a 94% probability the Fed will raise rates on Wednesday, its first increase since July 2023.
• Fed Chair Kevin Warsh said in his Jackson Hole speech that inflation remains too high, leading markets to nearly rule out holding rates steady.
• The surge was partly attributed to escalating US-Iran attacks on energy facilities and shipping routes.
• The German and Japanese benchmark yields also hit multi-decade highs as oil prices climbed.
• The US 30-year Treasury yield rose to 5.3% in London trading on Tuesday as the bond selloff continued.
• UK 10-year yields also climbed during the session, deepening the global bond rout.
• US average gasoline prices surpassed $4.32 per gallon on Monday, up about 45% since the start of the war on Iran.
• Average US diesel prices climbed to a record $7.39 per gallon, marking their highest level on record.
• Attacks disrupted Saudi Arabia's East-West pipeline, potentially cutting up to 4% of global oil supplies.
• The new Houthi attacks targeted a military base in southern Saudi Arabia, following Friday strikes that disrupted the oil bypass pipeline.