US 10-Year Yield Halts Slide

The yield on the 10-year US Treasury note rose was above 4.45% on Tuesday, halting the slide that bottomed at a three-week low in the prior week as the latest economic data favored restrictive policy by the Federal Reserve. The JOLTS indicated that job openings were well above expectations at their highest in over one year in April, consistent with robust labor data for the period in muted levels of jobless claims. On top of that, manufacturing activity was also above expectations in May per the ISM PMI, while prices continued to surge. Rate futures continued to show a portion of the market positioned for a rate hike by the Federal Reserve this year, even though the new FOMC Chairman Kevin Warsh had previously advocated for lower rates. The hawkish outlook for the central bank also persisted despite oil prices remaining below their peaks, as the continuous impasse between Iran and the US delayed expectations of restored energy supply from the region.

The yield on the US 10-year Treasury note edged down to 4.43% on Tuesday as a modest retreat in oil prices offered some relief, although sentiment remained sensitive to developments in the Middle East. US President Trump said Israel and Hezbollah had agreed to halt attacks against each other in Lebanon and that discussions with Iran were ongoing. On Monday, borrowing costs had risen after Iran’s Tasnim news agency reported that Iranian negotiators were pausing talks with the US following Israeli strikes in Lebanon, with Tehran also reportedly considering a full closure of the Strait of Hormuz. Investors are now awaiting key labour market data later this week, including the US jobs report, which is expected to help shape expectations for Federal Reserve policy under the new chair, Kevin Warsh. Traders are currently pricing in around 17 basis points of rate hikes by year-end, implying roughly a 70% probability of a 25bps increase, with a full hike priced in by March 2027.

The yield on the US 10-year Treasury note stabilized around 4.45% on Tuesday after experiencing significant fluctuations in the previous session, as investors weighed a deadlock in US-Iran peace negotiations while awaiting key US labor market data. On Monday, Iranian media reported that Tehran had suspended communications with Washington in response to Israeli attacks in Lebanon. Meanwhile, President Donald Trump said negotiations are continuing and indicated that a memorandum of understanding with Iran to reopen the Strait of Hormuz could be reached within the next week. Rising energy-driven inflation has led markets to price in the possibility of a Federal Reserve rate hike before the end of the year. Investors are now focused on Tuesday’s JOLTS job openings report, ahead of the closely watched US monthly employment data on Friday, for further guidance on the Fed’s policy trajectory.