Bond traders maintain expectations for a Federal Reserve interest rate hike by year-end, despite a softer US core inflation reading. This eased immediate pressure on the Fed to act sooner, allowing for a "wait and see" approach. The core CPI's 0.2% rise from April fell short of the 0.3% consensus forecast.

Bond traders price in Fed rate hikes as April CPI hits 3.8% and the 2-year Treasury yield reaches 4.18%, the highest since February 2025.

Fed plans to hold rates through 2026 amid inflation concerns. Rate hike in 2026 at 55% YES.