The spread between 10-year and two-year yields also narrowed to its smallest level in almost four weeks, reflecting shifting expectations around monetary policy. For hedge fund managers and macro investors, however, the bond market continues to send mixed signals. While lower energy prices have eased some inflation concerns, traders have not fully abandoned expectations that the US Federal Reserve could still tighten policy. Interest-rate swaps continue to imply close to a 40% probability of a rate increase at this week’s Federal Open Market Committee meeting, with a September hike remaining fully priced into markets. Even after the rally, the securities were expected to be issued at their highest yield since December 2024, highlighting that borrowing costs remain elevated despite the recent improvement in bond prices.