Treasury Yields Move Lower

The US 10-year Treasury yield fell nearly 2bps to 4.93% on Tuesday, reversing a modest early-session rise, as oil prices declined for a fifth straight session. Renewed hopes for a diplomatic solution to the conflict with Iran pushed oil down and helped ease concerns over inflationary pressures. Treasury yields have generally declined since the Fed raised rates last week for the first time since 2023, while Chair Warsh reaffirmed the central bank’s commitment to bring price stability, helping to restore its credibility. The decline in borrowing costs comes despite the Fed’s more hawkish tone, reinforced by recent comments from policymakers. Chicago Fed President Austan Goolsbee said the central bank cannot overlook persistent supply shocks, while St. Louis Fed President Alberto Musalem said further rate increases may be needed to bring inflation back toward target. Markets currently expect at least one more rate hike this year.

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.