The yield on the 10-year Treasury note stood at 5.28%, eight basis points below the 24-year high reached earlier in the session, as a pullback in oil prices eased concerns about energy-driven inflation. OPEC+ moved fully loaded tankers through the Persian Gulf to alleviate pressure on global refiners. This coincided with a strong 10-year note auction, which cleared 1.7 basis points through the when-issued level. Even so, long-dated yields remained near their highest levels since the early 2000s, reflecting the combination of persistent inflation risk, solid economic growth, widening fiscal deficits, and a surge in corporate bond issuance.
Minutes from the Federal Reserve’s most recent meeting indicated a broad consensus within the FOMC that policy rates need to remain elevated, with officials judging the labor market to be at or near full employment. Policymakers also remarked that Treasury market functioning remains orderly, while emphasizing the need to stay vigilant for potential strains stemming from higher yields. Futures markets currently price in more than an 80% probability of at least one additional rate hike by year-end.
