The probability of a May rate cut plummeted from 65% to below 30% following the latest inflation data. The 10-year Treasury yield spiked to 4.40%, increasing the benchmark for mortgages and corporate debt. This shift follows a Federal Reserve stance to hold rates higher for longer. The benchmark rate currently sits at 3.5%-3.75%.
Annual inflation accelerated to 3.3% in March, up from 2.4% in February, as energy prices spiked. The Consumer Price Index jumped 0.9% on the month, the biggest rise since June 2022. Energy alone accounted for nearly three-quarters of the increase. Petrol prices surged 21.2% and diesel prices spiked 30.8%, pushing the U.S. national average gas price to $4.30 per gallon.
These costs rose after Brent crude prices soared more than 30% and passed $100 per barrel. The surge was triggered by strikes on Iranian energy infrastructure and retaliatory measures affecting liquefied natural gas facilities in Qatar. The 10-year Treasury yield serves as the benchmark for mortgages and corporate debt.
