The yield on the US 10-year Treasury note edged down to 4.54% on Friday, marking a third straight session of declines and its lowest level in about a week, as inflation worries temporarily eased. Risk sentiment improved amid renewed optimism that the US and Iran might reach an agreement that could reopen the Strait of Hormuz, prompting oil prices to retreat from recent highs.
Even so, the backdrop remains highly fragile and volatile. Despite this week’s pullback, oil prices are still roughly 50% above their pre-conflict levels, sustaining inflationary pressures and underpinning a cautious stance among major central banks. Minutes from the latest FOMC meeting indicated that most policymakers still see the potential need for additional rate hikes if inflation remains persistently above the Fed’s 2% target. Futures markets have increasingly priced in the probability of a 25-basis-point rate increase by year-end.
