US 10-Year Yield Extends Rebound

The yield on the 10-year US Treasury note eased to 4.47% after testing 4.5% earlier in the session after Fed Chairman Warsh said inflation risks in the US were softening. This was aligned with the softer price data from the ISM PMI, as wholesale energy prices returned to levels comparable from before the war in the Middle East. Still, yields held 10bps above the seven-week low from Monday. The ADP Report showed 98,000 private-sector jobs were added to the economy, adding leeway for the Fed to tighten monetary policy to combat high inflation. Although oil prices retreated, refined fuel costs remained sharply higher and backed expectations of a Fed hike this year. Rate traders still showed a loose consensus of one hike by December, but a portion of the market has priced multiple hikes. In the meantime, Warsh reiterated his view that the Fed's balance sheet is too high and hampers the transmission of monetary policy through rate-setting, potentially preluding selling of notes and bonds.

The yield on the 10-year US Treasury note rose toward 4.50% on Wednesday, extending the sharp rebound since dropping to a seven-week low of 4.36% on Monday amid the hawkish outlook for the Federal Reserve. Fresh data from the ADP indicated the US added 98,000 private-sector jobs in June, slightly under estimates but extending the period of low firing in most sectors of the economy. The robust data combined with evidence of elevated core inflation rates following the interruption of global oil supply with the war in the Middle East. Although wholesale oil prices eased to pre-war levels, refined fuel costs remained sharply higher and backed expectations of a Fed hike this year. Rate traders still showed a loose consensus of one hike by December, but a portion of the market has priced multiple hikes. In the meantime, Fed Chairman Kevin Warsh campaign to shrink the Fed's holdings of Treasury notes and bonds also lifted yields.

The yield on the 10-year US Treasury note held around 4.46% on Wednesday after climbing about 10 basis points in the previous session, as signs of a resilient economy reinforced expectations of a hawkish Federal Reserve. Data released on Tuesday showed US job openings rose to a two-year high in May, indicating labor demand remained strong despite signs of softer hiring. Markets are now pricing in at least one Fed rate hike this year, with the first potentially coming as early as September. Investors are now awaiting the latest US monthly jobs report for further clues on the strength of the labor market and the outlook for Fed policy. Meanwhile, markets continued to monitor the ongoing US-Iran peace talks in Qatar amid hopes for a lasting ceasefire agreement, although the two sides were not expected to hold direct talks.