BlockBeats News, June 25th, Tom Lee stated that the market is still digesting Kevin Warsh's remarks after his first press conference last week and is repricing the macro environment. Oil prices fell in the past week, and the war premium is shrinking. The current oil price is not too far from the pre-conflict level of about $65, indicating that the market believes the related war risk is decreasing. However, on the other hand, the 10-year U.S. Treasury bond yield is still rising, currently at around 4.5%, higher than the pre-war level of about 4.2%. The main headwind facing the market recently has shifted from oil prices to yields.

Tom Lee pointed out that the market is not only watching the 10-year U.S. Treasury bond yield but is also starting to price in the possibility of the Fed needing to raise interest rates. According to the fed funds futures, the market is currently pricing in almost two rate hikes this year. Bank of America today further projected that the Fed will raise interest rates three times this year, in September, October, and December.

Jeffrey Gundlach often emphasizes the importance of watching the 2-year U.S. Treasury bond yield because it usually leads the Fed and hints at the Fed's policy direction. Between 2023 and 2025, the relationship between the 2-year U.S. Treasury bond yield and the fed funds rate had previously shown that the Fed's policy was overly tight and required rate cuts. However, this relationship has recently reversed, implying that the Fed needs to hike rates twice to catch up to the 2-year U.S. Treasury bond yield. He believes that, at least for now, the yield has become a headwind for the market.