FOMC minutes come under closer scrutiny
Minutes from the March meeting of the Federal Open Market Committee are due at 20:00 CET on Wednesday, and the market may focus closely on how policymakers assessed inflation risks at a time of severe oil-market stress. Although the oil futures curve has eased by almost $10 since those projections were made, rate markets have moved in the opposite direction and no longer price a cut by the end of 2026.
Change in the US yield curve since the Middle East war began, with the earlier curve in blue and the current curve in yellow, chart extracted from TradingView on 7 April 2026.
Demand for US debt is weakening
The recent rise in Treasury yields appears to reflect more than inflation alone. Deteriorating public finances and higher military spending linked to the Middle East conflict may also be weighing on demand for US government debt.
Recent auctions have shown weaker bid-to-cover ratios even as the Treasury offers higher yields, suggesting real demand is fading and primary dealers are being forced to absorb a larger share of issuance. That has left the market watching the next 10-year and 30-year sales as an important test of investor confidence.
Foreign buyers are stepping back
Foreign demand also appears to be softening. According to the article, China and Japan are both reducing exposure for different reasons, while Federal Reserve custody data suggests that foreign-held securities have fallen by about $40bn since the conflict began.
