US Treasury Yields Resume Climb

The yield on the US 10-year Treasury note moved back to 4.27% on Friday, hovering near four-week highs after briefly falling earlier in the session, as the conflict with Iran continued to escalate. Defense Secretary Hegseth told reporters that the US would carry out its largest wave of strikes yet against Iran on Friday. Oil prices also recovered after an early decline, remaining near their highest levels since 2022. The benchmark US yield is up nearly 13bps for the week, amid mounting concerns about an energy-driven inflationary spiral and worries over fiscal imbalances linked to war-related spending. The Federal Reserve will decide on monetary policy next week and, although no changes to the federal funds rate are expected, markets will closely watch for clues about policymakers’ outlook for the remainder of the year. Investors are currently pricing in only one rate cut by the Fed in 2026.

The yield on the US 10-year Treasury note fell about 2bps to 4.25% on Friday, marking its first decline in four sessions, as investors found some relief in a slight easing of oil prices following this week’s rally. At the same time, traders assessed a fresh batch of key economic data, including the PCE report, which showed the annual PCE inflation rate slowing to 2.8%. Meanwhile, GDP growth was revised sharply lower to 0.7% in Q4, half the initial estimate of 1.4%. As a result, traders reinforced bets on one Federal Reserve rate cut this year, possibly in September. The central bank will decide on monetary policy next week and, although no changes to the federal funds rate are expected, markets will closely watch for clues about policymakers’ outlook for the remainder of the year. The benchmark US yield is still up nearly 13bps for the week, amid mounting concerns about an energy-driven inflationary spiral and worries over fiscal imbalances linked to war-related spending.

The yield on the US 10-year Treasury note held around 4.26% on Friday, hovering near five-week highs as escalations in the Middle East conflict and rising oil prices fueled concerns about resurgent inflation, reinforcing bets that the Federal Reserve will keep interest rates higher for longer. The central bank is widely expected to hold the fed funds rate steady next week, though focus will turn to the updated dot plot and policymakers’ projections for the remainder of the year. Inflation risks also led markets to push back expectations for the next Fed rate cut from July to September. Investors now await January’s PCE price index, the Fed’s preferred inflation gauge, for fresh insights on price trends, though it will not capture the impact of the Iran war. Oil prices surged after Iran’s new supreme leader, Mojtaba Khamenei, pledged to keep the Strait of Hormuz effectively closed while Tehran intensified attacks on regional oil and transport facilities.