US Treasury Yields Reverse Early Decline

The yield on the US 10-year Treasury note hovered around 4.6% on Tuesday, pausing its recent climb as renewed optimism surrounding a potential US-Iran agreement eased concerns about inflation and further interest rate hikes. President Donald Trump said he suspended a planned strike on Iran scheduled for Tuesday after appeals from Saudi Arabia, Qatar, and the UAE, adding that the Gulf nations believed a deal with Tehran acceptable to Washington could still be achieved. Even so, the benchmark yield remained near its highest levels in more than a year as elevated oil prices linked to the Middle East conflict and accelerating US inflation led traders to rule out Federal Reserve rate cuts this year, while also boosting speculation that the Fed could still raise rates before year-end. Investors are now awaiting the latest FOMC minutes and flash US PMI data for additional clues on the outlook for monetary policy and economic activity.

The yield on the US 10-year Treasury note fluctuated around 4.6% on Monday, recovering from a brief pullback as traders continued to assess developments in the Middle East and persistent uncertainty over whether a US-Iran agreement can be reached in the near term. Iranian media reported that Washington had proposed a temporary waiver of oil sanctions until a final deal is reached but later Axios reported that Iran has given an updated proposal for a deal to end the war, but the White House believes it is not sufficient for a deal. The benchmark Treasury yield remained near one-year highs, supported by persistently elevated oil prices that continue to fuel global inflation pressures and constrain central banks’ ability to ease monetary policy. Markets currently expect the Fed to leave the fed funds rate unchanged through year-end, though the implied probability of an additional 25bps rate hike has risen to around 40%.

The yield on the US 10-year Treasury note swung around 4.6% on Monday amid fresh signs of progress in US-Iran negotiations. Iranian media reported that Washington had proposed a temporary waiver of oil sanctions until a final deal is reached, while separate reports suggested Tehran could accept a long-term freeze on its nuclear program. Still, benchmark Treasury yields remained near one-year highs, supported by persistently elevated oil prices that continue to fuel global inflation pressures and constrain central banks’ ability to ease monetary policy. In some cases, policymakers may even need to tighten further. Markets currently expect the Fed to leave the fed funds rate unchanged through year-end, though the implied probability of an additional 25bps rate hike has risen to around 40%. Investors also await the upcoming FOMC meeting minutes and flash US PMI data for further signals on the direction of monetary policy and the broader economic outlook.