The yield on the US 10-year Treasury note climbed above 5.2% on Tuesday, nearing its highest level since 2002, as markets braced for additional Federal Reserve tightening to counter energy-driven inflation linked to ongoing US–Iran tensions. Current market pricing implies roughly a 70% chance of a Fed rate hike in October.
Oil prices continued to advance after Iranian officials reportedly expressed skepticism about the prospects for a deal before the US midterm elections in November, following President Trump’s rejection of Tehran’s latest proposal.
At the same time, investors are gearing up for a crowded calendar of key economic data, including the PCE inflation report and monthly employment figures, which are expected to provide further clues about the strength of the US economy and help shape expectations for Fed policy. Robust economic data, deteriorating fiscal dynamics, and rising US government debt have all contributed to recent pressure on the Treasury market.
