US 10-Year Yield Slips for Second Session

The yield on the US 10-year Treasury note eased to around 4.54% on Friday, marking a second consecutive session of declines as lower oil prices helped ease inflation concerns and reduced fears of aggressive policy tightening. The move followed reports that the US and Iran will continue peace negotiations despite a recent escalation in hostilities. Even so, markets continue to expect the Federal Reserve to raise interest rates at least once this year. Meanwhile, New York Fed President John Williams said that, among the factors driving inflation in the US, he is most focused on demand fueled by artificial intelligence. Separately, Fed Chair Kevin Warsh announced the leadership of five task forces to review the US central bank’s approach to key areas of policymaking, signaling potential changes in how the Federal Reserve conducts monetary policy.

The yield on the US 10-year Treasury note edged down to 4.56% on Thursday, after climbing about 10bps over the previous two sessions to its highest level in roughly two months. Escalating tensions in the Middle East fueled a sharp rise in oil prices, as the US and Iran exchanged strikes. The developments also stoked concerns about another bout of inflation, reinforcing expectations that the Fed could keep interest rates higher for longer. On the data front, the latest jobless claims report continued to point to a resilient labor market. Meanwhile, minutes from the FOMC's June meeting showed that only a few policymakers favored a rate hike, although officials expressed growing concern about inflationary pressures. Markets continue to price in at least one Fed rate hike by the end of 2026, while the probability of a move at the September meeting currently stands at around 64%.

The yield on the 10-year US Treasury note hovered around 4.58% on Thursday, remaining near a seven-week high as renewed conflict in the Middle East pushed oil prices higher, fueling inflation concerns and strengthening expectations for further interest rate hikes. The US military confirmed it had carried out strikes on Iran for a second straight day in an effort to curb Tehran’s ability to threaten navigation through the Strait of Hormuz, while Iran threatened a large-scale retaliatory operation against US military bases across the region. Meanwhile, minutes from the Federal Reserve’s June meeting showed that only a few policymakers favored a rate increase, though officials expressed growing concern over inflation. Markets continue to price in at least one Fed rate hike by the end of 2026. Investors are now awaiting the latest weekly jobless claims and existing home sales data for fresh guidance on the interest rate outlook.