US 10-Year Yield Rises on Hawkish Fed Signals

The US 10-year Treasury yield climbed about 3 basis points to 4.98% on Tuesday as hawkish comments from Federal Reserve officials strengthened expectations for further interest rate hikes. On Monday, Chicago Fed President Austan Goolsbee said the central bank cannot overlook persistent supply shocks, while St. Louis Fed President Alberto Musalem said additional rate increases may be necessary to bring inflation toward the Fed’s target. Investors now await speeches from Fed officials John Williams and Tom Barkin later today. Last week, the Fed raised rates for the first time in three years and signaled further tightening later this year to curb inflation. Meanwhile, oil prices fell for a fourth straight session as diplomatic efforts to end the Middle East conflict intensified and energy flows from the region remained steady, easing inflation concerns.

The yield on the US 10-year Treasury note fell 4bps to 4.95% on Monday, as traders started the new week with another decline in oil prices, amid hopes that diplomatic efforts could lead to a resolution to the conflict with Iran. Oil prices have now fallen for four consecutive sessions, easing some concerns over renewed inflationary pressures. Hopes of easing geopolitical tensions, supported by the summit between President Trump and President Xi as well as this week’s UN General Assembly, also helped improve investor sentiment. Meanwhile, Chicago Fed President Goolsbee said he remains open to the possibility that inflation will resume its decline towards the 2% target, but warned that interest rates may need to rise if that fails to materialise. Several other Fed officials are scheduled to speak this week, with markets closely watching their comments for further clues on the outlook for monetary policy. Traders currently expect the Fed to deliver another 25bps rate hike this year.

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.