US 10-Year Yield Hits Near 2-Week Low

The yield on the US 10-year Treasury note declined to around 4.48% on Wednesday, reaching its lowest level in nearly two weeks as investors further reduced expectations for near-term Federal Reserve interest rate hikes amid signs of progress toward a US-Iran peace agreement. President Donald Trump said negotiations to extend a ceasefire and reopen the Strait of Hormuz are ongoing, while US Secretary of State Marco Rubio cautioned that any final deal could still require several more days to finalize. However, renewed hostilities in the Middle East continued to cloud the outlook, with the US military saying it carried out self-defense strikes in southern Iran, while Iran’s Revolutionary Guard claimed it targeted an F-35 fighter jet and multiple drones after they allegedly entered Iranian airspace. Investors are now awaiting upcoming PCE inflation data for additional insight into the Federal Reserve’s future policy trajectory.

The yield on the US 10-year Treasury note fell about 6 basis points to 4.5% on Tuesday, as investors returned from the long weekend and remained cautiously optimistic that the US and Iran could still reach a near-term agreement, despite recent military strikes and ongoing mixed signals from both sides. Attention is also focused on the Fed’s policy outlook, with markets reassessing expectations for interest rates after the surge in oil prices fuelled inflation concerns. Traders are now pricing in an 80% probability of a rate hike by December, a significant reversal from earlier expectations of two 25bps cuts prior to the US and Iran. The upcoming PCE inflation report, the Fed’s preferred gauge of price pressures, will provide further clarity on the inflation trajectory and the central bank’s likely policy response.

The yield on the US 10-year Treasury note fell about 5 basis points to 4.5% on Tuesday as bond markets reopened following a holiday-extended weekend, with investors assessing the latest developments in the Middle East. President Donald Trump said talks with Tehran were progressing well, though he warned that further attacks could follow if negotiations collapsed. Meanwhile, the US military targeted missile launch sites and vessels suspected of attempting to deploy mines in southern Iran, with US Central Command saying the operations were intended to protect American troops in the region. Despite the ongoing tensions, oil prices have dropped sharply over the past week amid renewed optimism that the US and Iran could reach an agreement to end the conflict and reopen the Strait of Hormuz, easing concerns about inflation and interest rate hikes. Investors are now awaiting upcoming PCE inflation data for fresh clues on the Federal Reserve’s policy outlook.