Bond Rout Fed Warning, ‘Powerful’ Strikes on Iran
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And I'm Caroline Hepker.
Our top stories. The US military says it has launched what it calls a powerful response to Iran's attempted missile attack on American forces in the Middle East. US Central Command says American forces struck dozens of Revolutionary Guard targets, including to command centres, missile and drone facilities and coastal defence sites. The strikes came less than 24 hours after Iran fired ballistic missiles at a US base in Jordan, ending a brief pause in hostilities. Meanwhile, U.S. Energy Secretary Chris Wright says oil continues to flow through the Strait of Hormuz under the protection of U.S. military escorts.
A seven-day trailing average right now out of the Arabian Gulf region is 13 million barrels a day, about half of that flowing through the Strait and half of that through bypass pipelines. So we're about two-thirds of the delivery of oil out of the Arabian Gulf region as we were before the conflict started.
You can hear our full interview with Energy Secretary Chris Wright on the Bloomberg Talks podcast. His comments came as Qatar resumed LNG exports for the first time in more than three weeks through the strait, offering tentative signs that energy supplies are beginning to recover despite the renewed fighting.
Long-term US Treasury yields have surged to their highest level in 19 years. As investors question whether the Federal Reserve is serious about tackling inflation, the sell-off followed the Fed's decision to leave interest rates unchanged for a seventh straight month, despite Chair Kevin Walsh's hawkish rhetoric.
For some households, businesses, and market professionals, five years of high inflation have left a mistaken impression that's hard to shake, that the Fed's implicit inflation target was somehow above 2%. Let me reiterate, there is no soft inflation target.
However, investors appeared unconvinced by Walsh's words. Sending 30-year yields sharply higher as markets wager the Fed was only delaying an inevitable interest rate hike. Within hours of his press conference, JP Morgan brought forward its forecast for the next US rate hike to December. Markets are now pricing a 65% chance of a rate rise at the next Fed meeting in September.
The Bank of England is expected to follow the Fed's lead and leave interest rates unchanged today. That's in line with market pricing. Traders see just a 1% chance of a rate hike with the Monetary Policy Committee expected to leave borrowing costs unchanged for a fifth straight meeting. Here's Bloomberg Economics Chief UK Economist Dan Hanson.
You've got inflation and the data not throwing up any red flags. Good news. On the other hand, re-escalation in the Middle East. And that is obviously a significant issue for the Bank of England and all central banks because oil prices have risen. Importantly, for European central banks, gas prices have risen. And you sort of add those two things up and you've got this picture where in the near term there's no rush to do anything but you've got to keep your options open because we just do not know where this is heading into the second latter half of this year.
What happened in the US strikes on Iran and which targets were hit?
Dan Hanson was speaking as markets put the odds of a rate hike in September at around 60%. We'll have live coverage of the Bank of England's decision here on Bloomberg from 12pm London time followed by Governor Andrew Bailey's press conference an hour later.
To some earnings news now. The French bank Société Générale has raised its profitability outlook and announced a €1.5 billion share buyback.
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