NEW YORK: The US bond market rallied back from its deepest selloff in 17 months as traders ditched wagers that the Federal Reserve (Fed) will hike interest rates, with the focus shifting to speculation the Iran war will deepen an economic slowdown.
The advance extended after Fed chair Jerome Powell said the central bank has little control over supply shocks, like the surge in oil prices caused by the US war against Iran.
The comments, delivered during an address at Harvard University, eased concerns that the central bank would be forced to tighten monetary policy to keep inflation from accelerating, driving traders to start pricing in an outside chance of cuts this year instead.
The about-face drove shorter-term treasury yields down by more than 10 basis points, before paring the drop.
That pulled the market back from its deepest monthly loss since October 2024, when investors were betting that President Donald Trump’s victory would pour fuel on the economy.
The rebound reflects increasing angst that the conflict raging in the Middle East will deal a hit to the American economy. — Bloomberg
