Hormuz suppresses the continued rise of US Treasuries, rate hike probability remains near 40%, and inflation expectations fall below the target line

(1) Due to the continued controlled impact of hostile actions in the Strait of Hormuz, US Treasury yields have declined further, oil prices have extended their losses, Brent crude has fallen by about 2%, and the US Dollar Index remains largely unchanged. (2) The market is focused on Tuesday's upcoming release of the July Consumer Confidence Index, expected to rise slightly from 91.2 to 92, but the reading remains at a historically low level, reflecting the public's continued caution regarding the economic outlook. (3) The baseline scenario for tomorrow’s Federal Reserve meeting is no change, but the probability of a rate hike remains relatively high. Federal funds futures indicate a nearly 40% chance of a hike, while policy uncertainty limits the downside space for short-term yields. (4) Inflation-linked swaps show that investors expect the inflation rate a year from now to be below the Federal Reserve’s 2% target, a view that is corroborated by oil price corrections and a cyclical decline in geopolitical risk premiums. (5) The yield on 10-year US Treasuries edged down from the previous settlement price to around 4.63%, while the 2-year yield also slid to about 4.30%. The curve shape has changed little, as the market awaits policy guidance and the release of consumer confidence data.