The yield on the US 10-year Treasury note declined to 4.54% on Tuesday, pulling back from the near three-week highs reached in the previous session. The move was supported by lower oil prices after Israel and Iran agreed to halt attacks, and as President Trump indicated that a deal with Tehran could be reached within days.
Investor attention is now turning to Wednesday’s US CPI release for fresh insight into the inflation outlook. Recent data continue to signal a resilient US economy and labour market, following last week’s stronger-than-expected jobs report. Existing home sales also rose more than forecast, while the trade deficit narrowed as exports climbed to a record high.
Markets remain positioned for higher borrowing costs from the Federal Reserve this year, with futures currently assigning about a 51% probability to a rate increase as early as October. Meanwhile, the yield on the more policy-sensitive 2-year Treasury note slipped 2 basis points to 4.15%.
