Treasuries Fall as Inflation Data Erode Fed Rate-Cut Wager

US Treasury yields surged after March inflation data—reflecting war-driven price pressures—diminished expectations of a 2026 Federal Reserve rate cut. The conflict with Iran triggered economic uncertainty, prompting traders to reassess monetary policy bets. Consumer price data, the first to capture war impacts, showed accelerating inflation, pushing yields up to five basis points higher in early trading. Markets reacted swiftly to signs of persistent price growth amid geopolitical tensions. President Trump’s threat to escalate the Iran conflict if weekend talks failed further spooked investors, extending yield climbs. The remarks amplified fears of prolonged inflation and delayed Fed easing. Bond traders, previously betting on a rate cut, now face reduced odds as inflation outpaces forecasts. The shift underscores how geopolitical risks can override economic projections. The Fed’s policy path remains uncertain, with inflation and war dynamics complicating decisions. Analysts warn prolonged conflict could force tighter monetary conditions despite growth concerns.