Stocks rose on signs that American lawmakers are making progress on debt-ceiling negotiations and will be able to avoid the country's first-ever default. Treasury yields rose on speculation that the Federal Reserve will need to keep interest rates higher for longer as long as inflation remains high.

The S&P 500 closed at a nine-month high, while the Nasdaq 100 gained nearly 2%, reaching its highest level since April 2022. House Speaker Kevin McCarthy and Senate Majority Leader Chuck Schumer are planning votes on a bipartisan deal to avoid a US debt default in the coming days. Equities briefly lost ground after House Financial Services Chairman Patrick McHenry stated that the two parties are "not close to being done."

- The swap market showed that bets on a June hike increased to around 40% after Fed Bank of Dallas President Lorie Logan said there is no clear case for a pause next month. In stark contrast, central bank Governor Philip Jefferson made the dovish case for patience. The two-year bond yield, which is more sensitive to upcoming Fed moves, topped 4.2% and approached a month high.