Treasury Yields Climb As Inflation Concerns Persist

The yield on the US 10-year Treasury note rose further to 4.39% on Thursday, hitting the highest since July, as mounting doubts over a near-term end to the war with Iran weighed on sentiment. President Donald Trump said he would not commit to a deal to end the conflict while Tehran shows little willingness to compromise. Disruptions linked to the conflict have pushed energy prices higher, reinforcing inflation concerns and strengthening expectations that the Fed will keep interest rates steady throughout the year. On the data front, initial jobless claims edged up slightly to 210K, while continuing claims fell to a near two-year low. Meanwhile, the yield on the 2-year Treasury note which is more sensitive to short-term Fed policy expectations, rose sharply by nearly 60 basis points to 3.96%.

The yield on the 10-year US Treasury note rose 5 basis points to around 4.38% on Thursday as investors monitored developments in the Middle East amid heightened uncertainty over efforts to end the Iran war. The White House maintained that talks are ongoing, with the Trump administration reportedly sending a 15-point plan to Iran via Pakistan aimed at resolving the conflict. Top Iranian authorities are reviewing the proposal but indicated no intention of holding talks with Washington. Tehran said it would reject a US ceasefire offer, instead countering with a five-point plan granting it control over the Strait of Hormuz. Disruptions from the conflict have pushed energy prices higher, fueling inflation concerns and reinforcing expectations that the Federal Reserve will keep interest rates steady throughout the year. Investors now turn to the latest weekly jobless claims data on Thursday for fresh signals on labor market conditions.

The yield on the 10-year US Treasury note fell to around 4.33% on Wednesday, pulling back from eight-month highs amid reports that the US was pursuing talks with Iran to end the conflict. President Donald Trump said Iran had offered a gesture of goodwill in negotiations tied to energy flows through the Strait of Hormuz. Israeli media also indicated that Washington was seeking a one-month ceasefire to facilitate talks, while the New York Times reported that the US had sent Iran a 15-point proposal to resolve the conflict. Still, investors remained skeptical as Tehran denied engaging in any negotiations with the US, while Gulf states signaled readiness to join the war against Iran. Oil prices eased on these developments, providing some relief to markets concerned that surging energy costs could fuel inflation and prompt interest rate hikes. Meanwhile, Federal Reserve Governor Michael Barr said the central bank may need to keep rates elevated for some time to address inflation.