US 10-Year Yield Holds Steady

The yield on the US 10-year Treasury note was little changed at around 4.48% on Friday as investors awaited the May employment report for further clues on labor market strength and the likely path of Federal Reserve policy. A string of labor market indicators released this week pointed to continued resilience in the US economy, reinforcing expectations that the Fed could raise interest rates before year-end as policymakers contend with inflationary pressures driven by higher energy costs linked to the Middle East conflict. Meanwhile, President Donald Trump said peace negotiations were nearing their final stage and is reportedly reluctant to reenter a full-scale war with Iran despite recent hostilities. However, Iranian Foreign Minister Abbas Araghchi said no meaningful progress had been made in the talks, while Iran-backed Hezbollah rejected a US-mediated ceasefire proposal between Israel and Lebanon, keeping geopolitical risks elevated.

The yield on the US 10-year Treasury note fell about 4bps to 4.46% on Thursday, nearly reversing the 6bps increase recorded in the previous session. Treasury prices benefited from a decline in oil prices as hopes grew that a ceasefire agreement between Israel and Lebanon could pave the way for a broader deal with Iran. Despite the improvement in sentiment, uncertainty remains elevated and the situation continues to be highly fragile, with oil prices still well above pre-conflict levels. Investors also continue to price in the possibility of a Federal Reserve rate hike before year-end, potentially as early as October, as higher energy prices add to inflationary pressures. Meanwhile, recent labor market data have pointed to a resilient US economy, with employment conditions strengthening over the past two months. Friday's jobs report is expected to provide further insight into the underlying strength of the labor market and its implications for monetary policy.

The yield on the US 10-year Treasury note hovered around 4.48% on Thursday after climbing in the previous session, as stronger-than-expected labor market data reinforced expectations of tighter Federal Reserve policy. The ADP report released Wednesday showed private-sector employment rose by 122K in May, beating forecasts and reaching its highest level since January 2025. Earlier in the week, JOLTS data indicated that job openings increased in April to their highest level since November 2024. Investors are now awaiting Friday’s nonfarm payrolls report for further clues on the strength of the labor market. Treasury yields also found support from escalating tensions in the Middle East, which have kept oil prices elevated and added to inflationary pressures. Markets currently price in an 85% chance of a quarter-point Fed rate hike by year-end, up from 60% a week ago.