The yield on the US 10-year Treasury note was little changed at 4.55% on Thursday, holding near a three-week high as investors weighed escalating tensions in the Middle East alongside the latest producer price data. In a further escalation of the conflict, President Trump pledged additional strikes on Iran and threatened to target the country’s energy infrastructure, including the key oil export terminal on Kharg Island.
At the same time, the latest PPI report showed headline producer inflation rising more than expected, while core measures came in below forecasts, mirroring the softer-than-anticipated core CPI figures released a day earlier. Although the energy shock from the conflict with Iran is adding to inflationary pressures, its broader pass-through to underlying price measures has yet to fully materialize.
Overall, the data did little to shift expectations for Federal Reserve policy. Investors still anticipate one interest rate hike this year, most likely in October.
