FX.co ★ Treasury Yields Lower to Kick Off the Week

The yield on the US 10-year Treasury note slipped about 4 bps to 4.24% on Monday, pulling back after a 15 bps jump to more than four-week highs last week. Investors are weighing the ongoing conflict with Iran and its implications for inflation and the US fiscal outlook. Oil prices softened after Treasury Secretary Bessent said the US is allowing Iranian oil tankers to pass through the Strait of Hormuz, and President Trump called on other countries to help keep the key shipping lane open. Nonetheless, uncertainty over the duration and outcome of the conflict remains high. US officials say they are in talks with Iran, but Tehran has denied seeking a truce. At the same time, attention is turning to the Federal Reserve, which will announce its latest monetary policy decision later this week. While the federal funds rate is widely expected to remain unchanged, investors will scrutinize policymakers’ assessment of the recent surge in energy prices and its effects on inflation and borrowing costs. Futures markets currently imply expectations for only one 25 bps rate cut, likely not before December.