US 10Y Yield Holds Steady

The yield on the US 10-year Treasury note steadied around 4.55% on Thursday as investors continued to track developments in the Middle East while awaiting fresh US economic data for further clues on the Federal Reserve’s policy outlook. The US military said it had completed its latest strikes on Iran, boosting hopes that peace negotiations could resume and easing some concerns about inflationary pressures. Meanwhile, US consumer inflation accelerated in May to its fastest pace in more than three years due to soaring energy costs, though the reading came in line with expectations. Traders modestly scaled back expectations for Federal Reserve rate hikes this year, although a quarter-point increase in December remains fully priced. Investors are now turning their attention to the latest producer inflation and weekly jobless claims data for additional signals on the future path of Fed policy.

The yield on the US 10-year Treasury note was little changed at 4.52% on Wednesday, easing from an intraday high of 4.55% after the latest US CPI report provided some relief that the energy shock has not yet significantly spilled over into broader price pressures. Annual inflation accelerated to 4.2% in May, in line with market expectations, while core CPI rose by just 0.2% on a monthly basis, undershooting forecasts. Following the release, traders modestly pared back expectations for rate hikes by the Fed this year, although a 25bps increase in December remains fully priced in. Investors will now turn their attention to Thursday's PPI report for further clues on underlying inflationary pressures. Meanwhile, last week's labour market data pointed to a resilient and potentially reaccelerating jobs market, while other economic indicators continue to signal solid momentum in the US economy.

The yield on the US 10-year Treasury note climbed to around 4.54% on Wednesday after facing pressure in the previous session, as renewed hostilities in the Middle East that threatened a fragile ceasefire and the prospects for a lasting peace agreement heightened concerns about inflation and interest rates. The US launched “self-defense strikes” against Iran in response to the downing of an American helicopter, while Iranian Foreign Minister Abbas Araghchi warned that Iran’s armed forces would leave no attack or threat unanswered. Rising energy prices fueled by the regional conflict added to worries about persistent inflation and the possibility of further central bank rate hikes. Investors also awaited the latest US inflation data for additional clues on the Federal Reserve’s policy outlook, after stronger-than-expected jobs figures last week reinforced expectations of an interest rate increase before the end of the year.