Change in wind direction! New bond king: The Federal Reserve may raise interest rates next

The expectation of a Federal Reserve interest rate cut is rapidly unraveling, and the new bond king believes the Fed may raise rates next. On Thursday, March 19, Jeffrey Gundlach, CEO of DoubleLine Capital and known in the market as the "new bond king," pointed out in a social media post that the two-year U.S. Treasury yield suggests the Fed may be facing a rate hike. He noted: The yield on the two-year U.S. Treasury has risen by 50 basis points in less than three weeks, and the current trend suggests the Fed may be facing a rate hike. On the same day this statement was made, Wall Street had largely ruled out the possibility of the Fed cutting rates in 2026. (The expected rate cut by the Fed this year is almost 0) Energy Shock Reignites Inflation Concerns The trigger for this reversal in expectations is the sharp rise in global energy prices caused by geopolitical conflicts. Before the outbreak of war, the market generally expected the Fed to cut rates at least twice in 2026. With energy prices soaring, the inflation outlook has become more complex, and this expectation has been completely repriced. On Thursday morning, the two-year U.S. Treasury yield, which is highly sensitive to policy direction, briefly climbed to a seven-month high, and although it later retreated, it still rose over 40 basis points in three weeks. (Since the U.S.-Iran conflict, the two-year U.S. Treasury yield has risen by over 50 basis points) Wall Street Journal mentioned that this week the Fed decided to keep the benchmark interest rate unchanged at 3.50% to 3.75%, and the latest policy statement still maintains a median outlook for one rate cut in 2026. However, it is worth noting that the current market's hawkish expectations have exceeded the level implied by the Fed's official guidance, with the implied probability of a rate hike in the futures market reaching about 6%. This means that some traders believe that if inflationary pressures persist, the Fed may not only remain on hold but could even restart tightening. Gundlach's warning further reinforces this tail risk narrative, leading to a cautious sentiment in the fixed income market