US 10Y Bond Yield Hits 5-week Low

The yield on the US 10-year Treasury note rose to 4.35% in a shortened session on Friday, moving further away from two-week lows reached earlier in the week, following a stronger-than-expected jobs report. The US economy added 178K jobs in March, nearly three times market forecasts of 60K while the unemployment rate edged down to 4.3% and wage growth slowed. The data reinforced expectations that the Fed will keep the federal funds rate unchanged this year. Investors also continued to assess developments in the Middle East. US President Trump intensified his rhetoric against Iran, threatening to target the country’s infrastructure, including bridges and power plants, while Iran reportedly struck additional sites in Arab Gulf states. Elevated energy prices are fuelling concerns about a potential inflationary spiral. Trading volumes are expected to remain light due to the Good Friday holiday, with US equity markets closed and bond markets operating on a shortened schedule.

The yield on the US 10-year Treasury note edged up to 4.32% in a shortened session on Friday, but hovering near two-week lows reached earlier in the week, as investors continued to assess developments in the Middle East and their potential impact on the economy and monetary policy, while awaiting the latest jobs report. US President Donald Trump intensified his rhetoric against Iran, threatening to target the country’s infrastructure, including bridges and power plants and Iran reportedly struck additional sites in Arab Gulf states. Elevated energy prices are fuelling concerns about a potential inflationary spiral, which could prompt the Fed to adopt a more hawkish stance. Markets are currently pricing in the Federal Reserve holding the federal funds rate unchanged this year. Trading volumes are expected to remain light due to the Good Friday holiday, with US equity markets closed and bond markets operating on a shortened schedule.

The yield on the US 10-year Treasury note edged down to 4.31% on Thursday after rising to as high as 4.38% early in the session, as a report that Iran is drafting a protocol with Oman to monitor traffic through the Strait of Hormuz offered some relief. However, volatility is expected to persist amid escalating rhetoric from President Trump and as crude prices remain near 2022 highs.Oil prices surged following Trump’s pledge to take more aggressive action against Iran. High energy prices are fuelling worries about an inflation spiral which could prompt the Fed to adopt a more hawkish stance. Earlier this week, Fed Chair Powell said officials may need to respond to the economic effects of the conflict, though not at this stage, adding that current policy is well positioned to allow a wait-and-see approach. Markets currently expect the Fed to keep the federal funds rate unchanged this year.