Treasury Yields Hold Near Multi-Year Highs as Fed Decision Looms

U.S. Treasury yields held steady near multi-year highs on Monday morning, as investors awaited the Federal Reserve's monetary policy decision amidst an escalating energy crisis in the Middle East.

The benchmark yield consolidated at 4.978%, hovering just below the psychologically significant 5% threshold after briefly breaching it on Friday.

Market expectations are for a 25 basis point rate hike, with a 86% probability of a September decision and strong odds of a follow-up increase in December, following last week's consumer price index report which showed headline inflation holding firm at 3.4% and core month-on-month CPI ticking up to 0.3%.

UBS strategists noted that markets are pricing only 'a handful of adjustment hikes rather than a new tightening cycle,' implying limited policy action from the Fed, while energy bourses remained under pressure, with oil prices jumping another 3% to trade near $112 a barrel.