US 10-Year Yield Holds Decline

The yield on the US 10-year Treasury note hovered around 4.59% on Wednesday after softer-than-expected US inflation data eased concerns about imminent Federal Reserve interest rate hikes. The annual US inflation rate eased to 3.5% in June from 4.2% in May, coming in below forecasts of 3.8% as lower oil prices helped moderate energy inflation. Consumer prices also fell 0.4% from the previous month, marking the first monthly decline since 2020. Meanwhile, Fed Chair Kevin Warsh reiterated the central bank’s commitment to restoring price stability during congressional testimony on Tuesday but stopped short of signaling a more hawkish policy stance. Markets continue to price in roughly a 50% chance of a Fed rate hike in September, as renewed tensions between the US and Iran lifted oil prices and kept inflationary pressures in focus.

The yield on the US 10-year Treasury note fell about 6 basis points to 4.57% on Tuesday, retreating from the two-month high of 4.62% reached in the previous session, as a softer-than-expected CPI report prompted investors to scale back bets on Fed tightening this year. Both headline and core inflation came in below forecasts, at 3.5% and 2.6%, respectively. Meanwhile, the CPI fell 0.4% from May, as the ceasefire between the US and Iran weighed on oil prices and eased inflationary pressures. Core CPI was unchanged from the previous month. Following the data release, traders priced in a nearly 60% probability of a Fed rate hike in September, down from around 70% the previous day. Meanwhile, the yield on two-year Treasuries which are sensitive to the near-term outlook for Fed monetary policy, fell as much as 14bps to 4.14% and was headed for its biggest one-day decline since February

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 unveiling of plans 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.