The Bond Market Not Celebrating The Iran Deal, Inflation Is Still A Worry

Fed Funds futures are still pricing in two additional rate hikes by May 2027, signaling a more hawkish market stance despite the Iran MOU deal. Rising real rates suggest bond investors are increasingly focused on inflation risk from an overheated economy, alongside ongoing U.S. fiscal concerns. The message is modestly negative for duration-sensitive assets and supportive of a risk-off rates backdrop.

Analysis

Fed Funds futures are still pricing in two additional rate hikes by May 2027, signaling a more hawkish market stance despite the Iran MOU deal. Rising real rates suggest bond investors are increasingly focused on inflation risk from an overheated economy, alongside ongoing U.S. fiscal concerns. The message is modestly negative for duration-sensitive assets and supportive of a risk-off rates backdrop.