The U.S. Treasury market is sending a clear signal to Federal Reserve Chair Wash that strong anti-inflation rhetoric alone is not enough to reassure investors, as the market strongly anticipates interest rate hikes. Driven by the brief surge in oil prices above $100 per barrel following the U.S.-Iran military conflict in July, the U.S. Treasury market has seen a massive sell-off.

The yield on the benchmark 10-year Treasury note has risen by more than 30 basis points since late June to around 4.678%, approaching a nearly decade-high.The yield on the 2-year Treasury note—which is most sensitive to monetary policy—has also climbed to about 4.328%, surpassing the Fed’s current 3.75% interest rate cap, reflecting strong market expectations for an interest rate hike.The CME FedWatch Tool shows that the market estimates a 62% probability that the Federal Reserve will keep interest rates unchanged at this meeting, but the probability of a rate hike has surged from about 13% a week ago to about 38%.

In addition, the tech sector’s large-scale issuance of corporate bonds to support artificial intelligence infrastructure has also intensified pressure on the bond market.Expectations of high interest rates are also weighing on the stock market. Last week, semiconductor stocks led the declines, with the Philadelphia Semiconductor Index falling more than 4% for the week, and the Nasdaq’s Composite Index dropping 2.1%, marking a 7.8% decline from its early June high.