Treasury Yields Rise as Oil Spikes

The US 10-Year Treasury Yield held below 4.45% on Friday after declining in the prior session, as easing oil prices and a fresh round of economic data prompted investors to reassess interest rate expectations. Crude oil retreated on what appeared to be a technical pullback, though it remains on track for a second consecutive weekly gain amid fading hopes for a US–Iran peace deal and expectations that the Strait of Hormuz will remain closed in the near term. Treasury yields have been trending higher since the onset of the Middle East conflict, driven by concerns that elevated energy prices could reignite inflation and force major central banks to keep rates higher for longer or potentially tighten further. On the economic front, recent data showed US consumption slowed in the first quarter, although strong artificial intelligence-related investment helped sustain a 2% annualized GDP expansion.

The yield on the 10-year US Treasury note fell below 4.4% on Thursday after testing nine-month highs at 4.45% last session as benchmark energy prices eased off their peaks, while markets assessed a batch of economic data. Long-term yields eased as oil and product prices whipsawed from their peaks, despite the impasse between Iran and the US that prolonged the suspension of energy exports from the key region. The latest data indicated that consumption in the US slowed in the first quarter, although surging AI investment supported the GDP enough for a 2% annualized expansion. Still, the 10-year yield remained sharply higher this year as inflation threats on a robust economy erased bets of a Fed cut this year. Core PCE prices accelerated in March and initial jobless claims plunged to the lowest in nearly 50 years. This was after Fed Presidents dissented against an easing bias in the FOMC's rate hold yesterday.

The yield on the US 10-year Treasury note held around 4.42% on Thursday, hovering at more than one-month highs after the Federal Reserve left its policy rate unchanged as expected but delivered a more hawkish message amid rising inflation concerns. Four policymakers dissented from the decision, arguing the Fed should no longer signal any bias toward easing, highlighting growing internal divisions over the policy outlook as uncertainty rises due to the Iran conflict. Markets have now fully priced out expectations of Fed rate cuts this year, while beginning to assign some probability to a potential hike in 2027. Inflation risks tied to the Middle East conflict also supported Treasury yields, after President Donald Trump said the US would maintain its naval blockade on Iran until a nuclear agreement is reached, while Tehran accused Washington of attempting to force Iran into surrender through economic pressure and internal political fragmentation.