The U.S. bond market is facing significant turmoil, with the 30-year Treasury yield surpassing 5%, driven by large federal deficits and persistent inflation concerns. This situation has led to increased skepticism about the Federal Reserve's ability to implement rate cuts in 2026, as reflected in market pricing. The probability of no rate cuts this year has risen to 61.7%, up from 57% a day earlier. The disconnect between recent Fed rate cuts and rising long-term yields underscores market unease regarding fiscal sustainability and inflation management. Additional borrowing needs announced by the Treasury and the recent U.S. credit rating downgrade by Moody's further complicate the economic outlook. The anticipated policy direction under incoming Fed Chair Kevin Warsh adds to the uncertainty surrounding future monetary policy decisions.