US 10-Year Yield Holds Above 4.2%

The yield on the 10-year US Treasury note climbed to around 4.3%, recovering from three-week lows as a fragile US-Iran ceasefire kept investors cautious about inflation risks. Iranian media reported that oil tanker transit through the Strait of Hormuz remained suspended following fresh Israeli strikes on Lebanon, while a senior Iranian official said three provisions of the ceasefire proposal had already been violated. On Wednesday, Treasury yields had dropped sharply after the US and Iran agreed to a two-week ceasefire, prompting a sudden fall in oil prices and easing inflation concerns. Meanwhile, minutes from the Federal Reserve’s latest policy meeting showed that a growing number of members saw a potential rate hike as necessary to curb inflation, though many still hoped the next move could be a cut. Investors now await February personal spending and the PCE deflator on Thursday, followed by Friday’s CPI report, for further guidance.

The yield on the 10-year US Treasury erased its 7bps drop to hover flat on Wednesday after Iran stated the US violated their ceasefire agreement, jeoperdizing the pullback in oil prices that calmed inflation fears. Still, the US refrained from striking Iran as threatened and yield maintained their drop from eight-month highs of 4.45% two weeks prior. Officials had pledged higher tanker flows through the Hormuz chokepoint to somewhat restore higher levels of energy exports with the ceasefire, although reports that tanker operators were still threatened by Tehran had already dimmed optimism of normalized oil. The energy shock since the start of the conflict raised energy costs globally and prompted several FOMC members to increase their concerns of inflationary pressures, per the latest meeting minutes. The initial impact of higher energy prices will be known Friday with the release of the US CPI, which is expected to accelerate to a two-year high.

The yield on the 10-year US Treasury note eased to 4.28% on Wednesday, trimming a sharper retreat from the morning but holding the pullback from eight-month highs of 4.45% two weeks prior, as temporary ceasefire between Iran and the US limited concerns of energy-fueled inflation. The agreement suspended threats of escalatory attacks between both sides, with officials pledging higher tanker flows through the Hormuz chokepoint to somewhat restore higher levels of energy exports. Still, strikes since the ceasefire and reports of tankers being intercepted limited optimism on the relief. The energy shock since the start of the conflict raised energy costs globally and prompted several FOMC members to increase their concerns of inflationary pressures, per the latest meeting minutes, although others continued to stress labor market concerns. The initial impact of higher energy prices will be known Friday with the release of the US CPI, which is expected to accelerate to a two-year high.