US Rates Outlook Repriced Amid Persistent Inflation Pressures
Markets have repriced the US rates outlook following Fed Chair Warsh's Jackson Hole speech last Friday, increasingly embracing a 'high-for-longer' narrative amid persistent inflation pressures and renewed supply-side shocks.
The probability of a September Fed rate hike has risen to 66%, with roughly 1.5 hikes expected by end-2026.
US Treasury yields have surged across the curve since Jackson Hole, with the 2y yield up 16.8bp, the 10y yield up 12.2bp, and the 30y yield up 8.0bp.
Brent crude prices are near $95/bbl after a 4.6% surge overnight, while agricultural commodity prices continue to trend higher, adding upside risks to global food inflation.
Asian currencies face headwinds from rising US yields and oil prices, worsening the terms of trade for net energy importers such as Thailand, the Philippines, India, and Korea.