US 10-Year Yield Eases from 9-Month High

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.

The yield on the US 10-year Treasury note rose about 7bps to 4.42% on Wednesday, a new high in roughly a month, as investors reacted to the latest FOMC decision. The Fed left the federal funds rate unchanged, as expected, but the decision was not unanimous, with three members dissenting over language suggesting the central bank could eventually resume rate cuts. This was seen as a more hawkish signal, with traders now pricing in roughly a one-in-three chance of a rate hike by April 2027. Short-term Treasury yields, which are more sensitive to interest rate changes, rose more sharply, particularly the 2-year yield, which climbed above 3.95%. Meanwhile, the Fed noted the war in Iran is weighing on the economic outlook and oil prices continued to rise, with President Trump saying the US would keep its naval blockade on Iran in place until it agrees to a nuclear deal.