Treasury Yields on the Rise Again

The yield on the US 10-year Treasury note climbed to around 4.24% on Thursday, reaching five-week highs as oil prices resumed their rally, heightening inflationary risks and reducing the likelihood of Federal Reserve interest rate cuts. Oil surged for a second day as the prospect of a protracted Iran war overshadowed a coordinated release of oil reserves by major economies, with the IEA approving its largest-ever release of 400 million barrels. Iraq also halted operations at its oil terminals after two tankers were targeted in Iraqi waters, highlighting elevated supply risks in the region. On the data front, February inflation came in line with forecasts, showing stable but above-target CPI. However, the full impact of the energy surge from the conflict has yet to be reflected. The Fed is widely expected to keep the federal funds rate steady next week, with traders pricing in only one 25 bps cut, possibly in September.

The yield on the US 10-year Treasury note rose to 4.2% on Wednesday, marking a second consecutive increase and reaching its highest level in about a month. Traders continue to monitor the war in Iran and its impact on oil markets. Oil saw brief relief amid reports that countries are preparing to release reserves, but prices resumed their rise, keeping concerns about an energy-driven inflation spike alive. On the data front, February inflation came in line with forecasts, showing stable but above-target CPI. However, the full effect of the energy surge from the conflict is yet to be reflected. The Fed is widely expected to keep the federal funds rate steady next week, with traders anticipating only one 25bps cut, possibly in September.

The yield on the 10-year US Treasury note held around 4.17% on Wednesday after facing heightened volatility earlier in the week, as investors awaited a key US inflation reading that could provide insight into recent price trends, though it is not yet expected to capture the impact of the Iran war. Traders also monitored developments in the Middle East amid mixed signals from the Trump administration. President Donald Trump said the conflict could end soon amid mounting market pressure, while senior officials indicated that military operations were intensifying and that diplomatic talks remained unlikely. Iran’s Revolutionary Guards also dismissed Trump’s claims, warning that the blockade would continue until US and Israeli attacks cease. Meanwhile, oil prices declined further after reports that the IEA proposed the largest release of oil reserves in its history to help stabilize markets.