US bond investors are favoring high-quality assets and avoiding large one-way bets as the outlook for monetary policy becomes harder to gauge due to fluid Middle East tensions and rekindled inflation from higher oil prices. The FOMC is expected to hold rates steady this week, but the CME FedWatch tool shows the probability of a rate hike rose to 36% as of the 27th, up from 16% a week earlier, with 43 basis points of tightening priced in by the end of 2026. BNY Chief Investment Officer Jason Granet said this is not an environment to take meaningful positions and has reduced his exposure, while Schroders Head of US Fixed Income Neil Sutherland keeps duration roughly neutral and is shifting from corporate bonds into securitized assets and mortgage bonds. Investors note that with credit spreads looking expensive, security selection is more important than broad risk-taking.