US 10-Year Treasury Yields Steadies

The yield on the US 10-year Treasury note held around 4.69% on Tuesday as investors continued to evaluate the outlook for Federal Reserve monetary policy amid heightened uncertainty in the Middle East. Markets are currently pricing in about a 65% chance of a 25 basis point Fed rate hike in September after the central bank left interest rates unchanged in July. However, three policymakers dissented from the decision, while Chair Kevin Warsh offered little forward guidance on the path of interest rates. Meanwhile, Bank of New York Fed President John Williams said monetary policy remains well positioned, adding that inflation is expected to ease during the second half of the year. Investors are now awaiting the latest JOLTS job openings report and international trade data due later today for further clues on the strength of the US economy.

The yield on the US 10-year Treasury note fell to 4.68% on Monday, supported by lower oil prices and easing inflation concerns as hopes grew that tensions in the Middle East could ease. US President Trump said negotiations with Iran would begin on Monday afternoon and canceled a planned attack on the country. Investors are also awaiting a fresh batch of US economic data this week, including the closely watched employment report, for further clues on the strength of the labor market. Last week, the Fed left interest rates unchanged, although three policymakers dissented. Markets are now pricing in a roughly 63% probability of a 25bps rate hike in September, down from around 80% before the policy decision, as Chair Kevin Warsh provided little forward guidance on the outlook for interest rates. Separately, reports indicated that Warsh is considering reducing the number of Federal Reserve policy meetings from the current eight per year.

The yield on the US 10-year Treasury note slipped to around 4.7% on Monday, retreating from an 18-month high as investors awaited a busy week of labor market data, highlighted by Friday's closely watched monthly US jobs report. Last week, the Federal Reserve left interest rates unchanged, although three officials dissented, warning that waiting too long to act could eventually require more aggressive policy tightening. Markets are currently pricing in about a 68% chance of a 25 basis point Fed rate hike in September. Meanwhile, reports indicated that Fed Chair Kevin Warsh is considering reducing the number of policy meetings from the current eight per year. Investors have criticized Warsh's efforts to limit forward guidance on the path of interest rates, while the Fed continues to face mounting pressure to do more to rein in inflation.