US 10-Year Yield Eases Ahead of Fed Remarks

The yield on the US 10-year Treasury note fell by about 3 basis points to 4.97% on Monday as investors awaited several appearances by Federal Reserve officials this week for further clues on the monetary policy outlook. On Sunday, Minneapolis Fed President Neel Kashkari said inflation remains too high and that price pressures have expanded beyond the oil-price shock linked to the Iran war. Chicago Fed President Austan Goolsbee is scheduled to speak later Monday, followed by New York Fed President John Williams on Tuesday. Global bond yields also eased as oil prices fell for a fourth consecutive session, helping reduce inflation concerns. Last week, the benchmark yield surged to a 19-year high as the Fed raised interest rates and signaled at least one more hike this year, while Chair Warsh reiterated the central bank’s commitment to containing inflation.

The yield on the US 10-year Treasury note edged up 7bps to 5% on Friday, recovering from an 8bps decline in the previous session, as traders digested a more hawkish Fed and reassessed the outlook for monetary policy. The central bank raised the target range for the federal funds rate by 25bps to 3.75%-4%, as expected. The Fed also signalled at least one more rate hike this year, while Chair Warsh reaffirmed the central bank’s commitment to taming inflation, helping to restore market confidence in its policy stance and credibility. The benchmark yield topped 5.04% ahead of the FOMC decision, its highest level since 2007, amid concerns over the Fed’s ability to bring inflation under control and persistently elevated oil prices. Meanwhile, oil prices were volatile on Friday after falling in the previous two sessions, amid concerns about supply from Saudi Arabia and as geopolitical tensions in the Middle East remained elevated.

The yield on the US 10-year Treasury note held around 4.94% on Friday after losing almost 10 basis points in the previous session, retreating from 19-year highs as softer oil prices eased inflation concerns. Oil prices fell for a third consecutive session as Saudi Arabia took steps to resume flows through its East-West pipeline, while President Donald Trump is expected to meet with Gulf leaders next week. Markets also continued to assess the Federal Reserve’s policy direction after the central bank raised interest rates by 25 basis points this week, marking its first hike in three years. The Fed indicated that additional tightening could be pursued later this year to curb persistent price pressures, with Chair Kevin Warsh emphasizing that inflation remains elevated. The Bank of Japan is likewise expected to increase rates, while the Bank of England kept borrowing costs unchanged on Thursday but warned that a prolonged Middle East conflict could eventually prompt further tightening.