Treasury Yields Little Changed at the End of a Volatile Week

The yield on the US 10-year Treasury note steadied around 4.27% on Thursday after experiencing elevated volatility earlier in the week amid growing optimism that the US and Iran could find a diplomatic solution to end the war. President Donald Trump said the seven-week conflict was “close to over,” while the White House expressed confidence in a potential agreement, noting that additional in-person talks were likely to take place again in Pakistan. Reports also indicated that Tehran could consider allowing free passage for ships via the Omani side of the Strait of Hormuz if a deal is reached to prevent renewed escalation. Earlier in the week, Treasury yields eased as declining energy prices helped reduce inflation concerns and scaled back expectations of further central bank tightening. The Federal Reserve is widely expected to keep interest rates unchanged this month and potentially through the remainder of the year.

The yield on the US 10-year Treasury note edged up to 4.27% on Wednesday after declining in the previous two sessions, but remained near one-month lows as investors pinned hopes on diplomatic efforts to resolve the conflict between the US and Iran and as oil prices stayed below recent highs. Stock and bond markets have increasingly priced out much of the risk premium built up since the conflict began in late February, with the US and Iran working toward a second round of negotiations. US President Trump said the conflict is “very close to over,” adding that Iranian authorities appear willing to reach a peace agreement, with further talks expected soon. Meanwhile, the Federal Reserve is widely expected to keep the fed funds rate unchanged later this month and through the year. Chicago Fed President Austan Goolsbee noted that rate cuts could be delayed until 2027 depending on how long elevated oil prices persist.

The yield on the 10-year US Treasury note traded around 4.25% on Wednesday after sliding for two straight sessions, as hopes for a diplomatic solution to the Middle East conflict allayed inflation concerns. The US and Iran are reportedly preparing for a second round of peace talks before the current two-week ceasefire expires, even as heightened tensions in the Strait of Hormuz continue to amplify global energy risks. Oil prices pulled back sharply, further reducing concerns about inflationary pressures and the need for additional central bank tightening. The Federal Reserve is now widely expected to keep rates unchanged through the year, with Chicago Fed President Austan Goolsbee noting that rate cuts could be delayed until 2027 depending on how long elevated oil prices persist. Meanwhile, investors are set to watch upcoming data including import and export price indexes, as well as the NY Empire State Manufacturing Index and the NAHB Housing Market Index.