Bonds Rally Before Fed as Oil Extends Losing Run: Markets Wrap

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June 17, 2026 - 08:04

7 minutes

(Bloomberg) — Bonds climbed as oil headed for its longest losing streak in 10 months, with investors awaiting the Federal Reserve’s policy decision for fresh clues on the outlook for global interest rates.Yields on benchmark Australian and Japanese 10-year debt fell at least five basis points while that on similar-maturity Treasuries dipped one basis point to hold near a one-month low. S&P 500 futures rose 0.2% after a pullback in chip stocks dragged US equities lower Tuesday, sending the Nasdaq 100 down almost 2%. A gauge of Asian shares advanced 0.4% to head for a fourth day of gains, while European futures were down 0.2%.Brent crude fell below $79 a barrel to its lowest level in more than three months. Prices slumped 15% over the last four sessions on bets the US-Iran deal to reopen the Strait of Hormuz will unleash a wave of supply and help ease concerns over inflation. That has prompted investors to reassess the global rates outlook just as the Fed convenes for the first time under Chairman Kevin Warsh.“An actual end to the war and oil flowing freely will bring yields lower in the short term,” said Byron Anderson, head of fixed income at Laffer Tengler Investments, which oversees more than $1.7 billion. “Rate hikes will disappear once energy inflation dissipates.”With a well-flagged hike from the Bank of Japan seen as an exception, most developed-world central banks, including the Fed, are expected to make no changes this week.The bigger focus for investors is what the policy outlook looks like under Warsh. Bloomberg Economics sees a shift in how the Fed communicates with markets as Warsh is unlikely to submit his own “dot” to the closely scrutinized dot plot, breaking with precedent under Jerome Powell, Janet Yellen and Ben Bernanke.“The wild card is going to be whether Warsh goes through with balance sheet reduction and end signaling from the Fed,” said Anderson.Options traders are increasingly divided over the Fed’s near-term rate path, with conflicting bets that span from cuts to various degrees of hikes over the coming months. Policy forecasts from Wall Street strategists also run the gamut. US asset manager PGIM this week said the Fed will raise rates three times this year, while Citigroup Inc.’s Andrew Hollenhorst has said the central bank will cut rates this year. BNP’s recent call is for three rate hikes starting in December.Meanwhile, China’s central bank hinted at a potential shift in its policy interest rate framework with a focus on the overnight rate, a move that would bring it more in line with global peers. The People’s Bank of China will improve its adjustment of short-term interest rates, and increase overnight reverse repurchase operations at an appropriate time, Governor Pan Gongsheng said.China also announced new money-market measures to broaden the use of its currency among entities like foreign central banks and sovereign wealth funds.On the geopolitical front, the US and Iran are preparing to formally sign a memorandum of understanding on June 19 in Switzerland. Still, many European governments, energy investors and shipping companies have reservations about how fast the Strait of Hormuz can return to pre-war conditions.“The backdrop has actually tilted more dovish over the past 48 hours, with oil falling sharply on Hormuz reopening expectations, providing a real disinflationary impulse,” said Billy Leung, an investment strategist at Global X Management. “But the market won’t get ahead of that until it hears directly from Warsh.”Elsewhere in markets, a gauge of the dollar was steady while gold held gains after advancing more than 6% over the past four sessions.What Bloomberg Strategists Say:“The US dollar regained much of its lost mojo after the Iran war sent crude prices soaring. So far this week, though, the currency is only modestly lower despite oil tumbling. That resilience would be at risk of cracking if Wednesday’s Fed meeting delivers a more dovish outlook than anticipated.”— Garfield Reynolds, MLIV Asia Team Leader. Click here for the full analysis.Corporate Highlights:SpaceX jumped for a third straight day on Tuesday, overtaking Amazon.com Inc. in value to become the fifth-largest stock in the world. Kuaishou Technology is in discussions with General Atlantic to lead a first round of financing for its video AI arm, seeking to secure a major US backer ahead of an initial public offering. SpaceX formally agreed to take over Cursor in a deal that values the artificial intelligence coding startup at $60 billion, cementing a key part of Elon Musk’s efforts to catch up with rivals on coding tools. US Commerce Secretary Howard Lutnick warned Anthropic PBC in a letter last week that it would need government permission to grant foreign nationals access to its most advanced AI models and threatened criminal and civil penalties if the firm failed to comply, according to a copy obtained by Bloomberg News. Yum! Brands Inc. is selling its struggling Pizza Hut division for $2.7 billion, allowing the restaurant operator to focus on its better-performing KFC and Taco Bell chains. Robinhood Markets Inc. said it’s cutting 10% of its workforce, a reduction of around 300 positions, to “remain lean and disciplined” as it develops new products. South Korean retail investors snapped up almost $800 million of SpaceX shares on the stock’s first day of trading, underscoring strong demand for Elon Musk’s company. Some of the main moves in markets:StocksS&P 500 futures rose 0.2% as of 7:01 a.m. London time Nasdaq 100 futures rose 0.6% Futures on the Dow Jones Industrial Average were little changed The MSCI Asia Pacific Index rose 0.4% The MSCI Emerging Markets Index rose 0.3% Japan’s Topix rose 0.6% Australia’s S&P/ASX 200 rose 0.5% Hong Kong’s Hang Seng fell 0.7% The Shanghai Composite was little changed Euro Stoxx 50 futures fell 0.2% CurrenciesThe Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1611 The Japanese yen was little changed at 160.33 per dollar The offshore yuan was little changed at 6.7570 per dollar The British pound was little changed at $1.3422 CryptocurrenciesBitcoin was little changed at $65,744.7 Ether fell 0.3% to $1,791.34 BondsThe yield on 10-year Treasuries was little changed at 4.43% Germany’s 10-year yield declined two basis points to 2.93% Britain’s 10-year yield declined two basis points to 4.79% Japan’s 10-year yield declined five basis points to 2.595% Australia’s 10-year yield declined six basis points to 4.76% CommoditiesSpot gold was little changed West Texas Intermediate crude rose 0.2% to $76.17 a barrel This story was produced with the assistance of Bloomberg Automation.–With assistance from Masaki Kondo, Winnie Hsu, Ruth Carson and Jake Lloyd-Smith.©2026 Bloomberg L.P.