Traders Price 25-Basis-Point Fed Hike by Mid-2027 as Treasury Yields Push Above 5%
Updated
Updated · Bloomberg · May 12
Traders Price 25-Basis-Point Fed Hike by Mid-2027 as Treasury Yields Push Above 5%
11 articles · Updated · Bloomberg · May 12
Interest-rate swaps again imply a quarter-point Federal Reserve hike by the middle of next year as traders rebuild bearish positions in US Treasuries.
Rising oil prices and stubborn inflation drove the hawkish repricing, extending a selloff from the front end of the curve to long-dated bonds.
Long-maturity Treasuries are under added pressure as traders bet yields can hold above 5%, signaling expectations of tighter policy for longer.
Earlier on Tuesday, markets had already erased 2026 rate-cut bets after April CPI rose 3.8%, with energy shocks and stronger core services fueling fears inflation could climb toward 5%.
Why do markets and consumers expect high inflation while Wall Street economists predict a rapid cooldown?
Beyond gas prices, what looming supply chain crises in food and tech will impact American households next?
Can we trust inflation predictions from markets that are themselves facing accusations of illegal activity?
Oil Above $100: How the 2026 Middle East Crisis Is Driving Global Inflation and Accelerating the Energy Transition
Overview
In May 2026, the global economy faces a sharp rise in inflation as oil prices surge above $100 per barrel. This is mainly driven by escalating geopolitical tensions in the Middle East, especially Iran’s demands and the risk of disruption at the vital Strait of Hormuz. The threat to this key oil chokepoint has profound effects on oil market stability, causing higher energy prices to spread across economies. As a result, both consumer and producer prices are rising, particularly in countries that depend heavily on Middle Eastern oil, fueling a new wave of inflation worldwide.