Bond traders have adjusted their expectations for Federal Reserve rate cuts in 2026, now anticipating only a 24-basis-point reduction, down from the 30 basis points expected earlier. This change reflects a shift in interest rate swaps tied to Fed policy meeting dates. The adjustment comes amid a decline in U.S. Treasuries, with the two-year yield rising 4 basis points to approximately 3.70%. The pressure on U.S. Treasuries is attributed to investor concerns over the ongoing Middle East conflict, which could drive up energy prices and reignite inflationary pressures. As a result, traders are reassessing the likelihood of significant rate cuts by the Fed this year.