FX.co ★ Treasury Yields March Higher

The yield on the US 10-year Treasury note rose to 4.5% on Monday, extending May’s increase of nearly 6 basis points. The move came as oil prices continued to climb after Iranian media reported that Tehran had cut off communications with Washington following attacks in Lebanon and was preparing to fully close the Strait of Hormuz. Earlier exchanges of military strikes between the US and Iran had already cast doubt on the prospects for a diplomatic deal. A prolonged shutdown of the Strait of Hormuz would intensify inflationary pressures by pushing energy prices higher, reinforcing expectations that the Federal Reserve will keep interest rates elevated for longer. Market pricing now puts the odds of a Fed rate hike in December at above 50%. Separately, former Fed Chair Jerome Powell warned that attempts by the Trump administration to pressure the central bank into cutting rates could erode public confidence in its independence.