The yield on the US 10-year Treasury note fell to 4.91% on Monday, its lowest level since mid-September, as a sharp drop in oil prices helped ease inflation concerns. Sentiment was further lifted by rising hopes for a diplomatic resolution to the conflict in the Middle East, following reports that President Trump wants to allow more time for negotiations with Iran and that Iran’s Supreme Leader has authorised talks. These developments temporarily reduced worries about additional supply disruptions and their potential inflationary impact.
At the same time, investors are preparing for a busy week, with the US midterm elections and several key economic releases, including the jobs report, expected to offer fresh signals on the Federal Reserve’s policy trajectory. Last week, the Fed left interest rates unchanged, as widely anticipated. Even so, markets continue to price in another 25-basis-point rate increase in December, with the implied probability holding at around 75%.
