Bond Market Sees Brief Relief Amid Oil Price Fears

The bond market experienced a brief respite on Thursday as yields on U.S. and Japanese debt eased somewhat, but the overall environment remains challenging for investors in debt assets.

Oil prices have been holding above $90 a barrel, while the ongoing US-Iran strikes are fueling concerns about a new wave of inflation and putting pressure on central banks to maintain tighter monetary policy.

The Federal Reserve's decision is eagerly anticipated, with investors raising their estimate of the probability that the U.S. Federal Reserve will increase its benchmark interest rate by 25 basis points in September to around 67%, up from 37% a week ago.

New York Federal Reserve President John Williams tempered those expectations somewhat, stating that rising yields on long-term bonds reflected the resilience of the economy and that he would like to see more data before making a decision on interest rates.