Oil Price Decline Eases Fed Rate-Hike Pressure, UBS Says 2-Year Yields Fall

According to Leslie Falconio, head of taxable fixed income strategy at UBS Global Wealth Management, falling oil prices following the U.S.-Iran agreement to reopen the Strait of Hormuz are reducing expectations for Federal Reserve rate hikes in 2026. Falconio noted that while two-year Treasury yields had previously risen amid market expectations of rate increases with nearly 100% probability by December 2026, the recent oil price decline is causing markets to pare those hike expectations, pushing two-year yields lower, according to Bloomberg Television.
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