US 10-Year Treasury Yield Holds Steady

The yield on the US 10-year Treasury note hovered around 4.5% on Tuesday after climbing in the previous session, as investors monitored US-Iran peace talks while continuing to gauge the outlook for Federal Reserve interest rate hikes this year. In a key development, Washington granted Tehran a 60-day license to sell oil on international markets, boosting expectations of a faster recovery in global supply. Meanwhile, markets remain positioned for tighter monetary policy after the Fed struck a hawkish tone last week and raised its inflation projections. Both Deutsche Bank and BofA Global Research have revised their forecasts to include a rate hike in September. Investors are now looking ahead to this week’s PCE report, which contains the Fed’s preferred inflation measure and is expected to provide fresh clues about underlying price pressures.

The yield on the US 10-year Treasury note rose to 4.5% on Monday, its highest level in about two weeks, while the more policy-sensitive 2-year Treasury yield climbed above 4.2%, reaching its highest level since February 2025. Investors returned from the long weekend focused on the outlook for monetary policy and inflation, despite signs of progress in US-Iran negotiations that contributed to another decline in oil prices. Markets are currently pricing in at least one 25bps Federal Reserve rate hike by year-end, with the probability of such a move as early as September standing at around 50%. Attention now turns to Thursday's PCE report, which includes the Fed's preferred inflation gauge and is expected to provide fresh insight into underlying price pressures and the likely path of interest rates.

The yield on the US 10-year Treasury note climbed to around 4.48% on Monday as investors assessed evolving developments in US-Iran peace negotiations while awaiting a key US inflation report. Reports suggested that Washington and Tehran had agreed on a roadmap toward a final agreement within 60 days, helping ease market concerns after both sides recently exchanged fresh threats related to the conflict in Lebanon. Attention now turns to this week's US PCE price index release, the Federal Reserve’s preferred measure of inflation. Last week, the Fed left interest rates unchanged but adopted a more hawkish tone. Nine of the 19 Fed policymakers now project at least one rate increase before year-end, with markets increasingly pricing in a potential hike as early as September. Higher rate expectations continued to provide support for Treasury yields.