Treasury Yields Retreat

The yield on the US 10-year Treasury note fell to 4.65% on Monday after reaching its highest level since January 2025 last week, helped by declining oil prices. The US suspended its nearly two-week campaign of strikes against Iran late on Friday, although no official announcement was made. As a result, Tehran halted its retaliatory military operations and held talks with Oman on ensuring shipping through the Strait of Hormuz. These developments alleviated concerns over further supply disruptions and a renewed inflationary spiral, prompting investors to scale back expectations for Fed's tightening. Investors are also awaiting the Federal Reserve's monetary policy decision later this week. The central bank is widely expected to leave the federal funds rate unchanged, although markets currently assign roughly a 33% probability to a rate hike. Looking ahead, a September increase remains the base case, with traders pricing in nearly an 80% chance of such a move.

The yield on the US 10-year Treasury note fell to around 4.64% on Monday, pulling back from six-month highs as oil prices dropped following a pause in hostilities between the US and Iran over the weekend, easing concerns over supply disruptions and inflation. The US suspended its nearly two-week campaign of strikes against Iran beginning late Friday without an official announcement, while Tehran said it had ended its retaliatory military operations and held discussions with Oman regarding the Strait of Hormuz. Meanwhile, investors are awaiting the Federal Reserve's policy meeting this week, where officials are widely expected to leave interest rates unchanged. However, some market participants believe the central bank could act as early as this week's meeting in response to renewed inflationary pressures. Investors are also looking ahead to advance Q2 GDP data, PCE inflation figures, and earnings from major US companies for further insight into the strength of the economy.

The yield on the US 10-year Treasury note edged lower to 4.67% on Friday, pausing after a four-session rally that had lifted the benchmark yield to its highest level since January 2025. Oil prices eased during the session, helping push yields slightly lower, although tensions in the Middle East remained elevated, with US President Trump saying he would soon decide whether to launch a "massive attack" on Iran. On the data front, flash S&P Global PMIs showed that US services sector activity strengthened in July, while manufacturing growth slowed and price pressures intensified. Investors are now turning their attention to next week's Federal Reserve policy decision. The central bank is widely expected to leave the federal funds rate unchanged, although markets are pricing in roughly a 35% probability of a rate hike. The probability of a September hike currently stands at nearly 80%.