US Treasury yields climb as Fed meeting nears amid geopolitical tensions

US Treasury yields are climbing as the Federal Reserve approaches its April 28-29 meeting, with Polymarket pricing a 99.8% chance of no rate cut and the federal funds rate held steady at 3.50-3.75%.

Market reaction

The odds for a 25 bps cut after the April meeting sit at 0.1% YES. The market for a 50+ bps cut is equally flat at 0.1% YES. Investors are wary of the ongoing US-Iran conflict, which has disrupted oil supplies and pushed up energy prices, further complicating the Fed’s rate calculus.

Why it matters

Geopolitical tension has raised inflation expectations, which are feeding into the bond market. The 10-year Treasury yield is hovering around 4.3-4.43%, leaving limited room for the Fed to ease. The largest recent price move was a 49-point spike at 11:40 AM, showing how reactive the market is to geopolitical news. Expectations have shifted from two potential rate cuts in 2026 to at most one, or none.

What to watch

Face value on the Fed rate decision market runs $4.9 million per day, but actual dollars traded are $100,536. That gap means the market is easily moved by large orders: it takes just $4,908 to shift the 25 bps market by 5 points. Buying YES at 0.1¢ would pay 1000x if a cut happens, though that outcome requires a major shift in geopolitical or economic conditions.

Watch the Fed’s post-meeting language, particularly any comments from Chair Powell or FOMC members signaling a change in stance. Any escalation in the Middle East that moves oil prices would directly affect inflation expectations and, by extension, these markets.

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