Two-year yields hit 17-month high on oil surge, Fed fears

US two-year Treasury yields climbed to a 17-month high of 4.298%, while benchmark 10-year yields reached 4.66%, their highest since May, driven by rising oil prices from escalating Iran conflict tensions and hawkish Fed signals. Fed funds futures now price a 32% chance of a rate hike at the upcoming July 29 meeting, with 90% odds of at least one hike by year-end, after Governor Waller indicated borrowing costs may need to rise in the near term. The Treasury saw soft demand for a 13 billion dollar 20-year bond auction, while 5-year inflation breakevens rose to 2.31% from 2.21% in late June.