Just a few weeks ago, the U.S. interest rate debate centered on how many rate cuts the Federal Reserve will make in 2026. But with the economy showing only weak signs of slowing, inflation remaining above the central bank’s 2% target, and oil prices rising 50% in three weeks, rates traders are starting to consider a rate hike as early as April.
According to CME FedWatch, the odds that the Fed will tighten policy at its next meeting in April have increased to 12%. That’s up from 0% a week ago and an even sharper reversal from two months ago, when conventional wisdom said a rate cut was likely that month.
February data showed annual headline inflation of 2.4% and core inflation of 2.5%. And these numbers predated the war in Iran and the 50% rise in oil prices that followed.
The long end of the bond curve sold off sharply at the same time, with the 10-year US Treasury rising another 10 basis points on Friday to 4.38%, up from less than 4% in early March.
The liquidation of bonds is global. In the UK, yields on 10-year government bonds have jumped above 5%, up 15% over the past month, and are at their highest level since 2008.
Bitcoin ahead of the curve?
The averages of the major stock markets have not made big moves since the start of the war, but sales are beginning to pile up. Down another 0.9% today, the S&P 500 is on track for a fourth consecutive weekly decline and is now down more than 5% since the end of February. The Nasdaq is down in the same way, including a 1.2% drop on Friday.
Precious metals – which had risen significantly in the weeks leading up to the war – have since sold off. Trading at around $5,500 an ounce at the start of the month, gold was worth $4,569 on Friday. Silver crashed to $69.50 an ounce from $95.
“Bitcoin has once again played the role of canary in the macro coal mine,” said Andre Dragosch, European head of research at Bitwise. “At the current level, bitcoin is already pricing in a recession, while many traditional assets are not,” he added.
Bitcoin continues to hover around $70,000 and remains, besides oil, one of the best performing assets since the start of the war.
