BlockBeats reported on June 15, citing Jinshi, that Leslie Falconio, head of taxable fixed income strategy at UBS Global Wealth Management, said the pressure on the Federal Reserve to raise interest rates this year is easing after the United States and Iran announced an agreement. Following the announcement, oil prices retreated and the U.S. Treasury market strengthened.
Oil decline reverses short-end Treasury pressure
Falconio said that even before the ceasefire agreement was reached, oil prices had already started to fall, but the two-year U.S. Treasury yield was still rising. She explained that the move reflected the fact that markets had priced in an almost 100% probability of a rate hike in December at that time.
According to Falconio, the situation has now changed: oil prices are falling, and markets are gradually withdrawing those expectations for rate increases. As a result, the two-year Treasury yield has begun to move lower. Her comments link the pullback in crude prices with the repricing of Federal Reserve policy expectations and the recent performance of short-dated U.S. government debt.
Warsh prepares for first rate decision
New Federal Reserve Chair Warsh will preside over his first interest-rate decision this week. Before the latest decline in oil prices, a surge in crude had renewed inflation pressure, and voices within the FOMC supporting a rate increase this year had been growing.
Falconio said she expects the FOMC to formally remove its easing bias at this week’s meeting, making the policy outlook more hawkish. Even so, she still believes the Fed’s next move will be a rate cut, and that the timing will be in 2027.