US 10-Year Yield Holds Advance

The yield on the US 10-year Treasury note held around 4.62% on Tuesday, hovering near two-month highs as escalating tensions in the Middle East drove oil prices sharply higher, fueling concerns over inflation and the interest rate outlook. The move followed President Donald Trump’s decision to reinstate a blockade on Iranian vessels transiting the Strait of Hormuz and seek reimbursement from countries benefiting from US efforts to secure the vital shipping lane. Investors also awaited key US inflation data and Federal Reserve Chair Kevin Warsh’s testimony before the US Congress later today, with markets closely watching his remarks for further policy signals. Markets now price in roughly a 51% chance of a Fed rate hike in September, compared with a 23% probability that the central bank will leave rates unchanged.

The yield on the US 10-year Treasury note rose to 4.59% on Monday, reaching its highest level in nearly two months, while the two-year Treasury yield climbed to its highest level since early 2025. The US and Iran exchanged fresh military strikes, and conflicting reports persisted over whether the Strait of Hormuz remains open to shipping. Tehran declared the strait closed "until further notice," while US President Trump said the US would reinstate its blockade of Iranian vessels and impose a 20% fee on all cargo transiting it. The resulting rise in oil prices heightened concerns that renewed energy cost pressures could fuel inflation. Markets are also awaiting this week's US CPI and PPI reports for further insight into inflation trends, as well as Fed Chair Warsh's testimony before Congress for additional clues on the central bank's policy path. Traders are currently pricing in at least one Fed rate hike this year, with the probability of a September increase hovering around 71%.

The yield on the US 10-year Treasury note climbed to around 4.59% on Monday, hovering near seven-week highs as renewed missile strikes between the US and Iran drove oil prices higher, reinforcing expectations of interest-rate hikes to contain inflation. The US carried out its fourth strike in a week against Iran on Sunday in retaliation for an Iranian attack on a Cyprus-flagged container ship. Investors are also awaiting key US inflation data this week for further clues on the Federal Reserve's policy outlook. Markets currently expect the Fed to deliver one more interest-rate hike before the end of the year. Minutes from the Fed’s June meeting, released last week, showed that a few policymakers saw a case for raising rates, though they ultimately supported keeping policy unchanged. Meanwhile, Fed Chair Kevin Warsh is scheduled to make his first appearance before the US Congress on Tuesday and Wednesday.