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US Treasury yields fall as oil drops on Iran de-escalation hopes
The 10-year yield fell 3.2 basis points to 4.647%, while markets raised the odds of at least a 25 basis-point Fed hike to 37.9% for Wednesday.
U.S. Treasury yields fell on Monday as crude prices plunged after the U.S. suspended air strikes against Iran and President Donald Trump said talks were progressing, boosting hopes of a negotiated outcome. Reuters reported that the move came ahead of a Federal Reserve policy decision later in the week.
The benchmark 10-year Treasury yield dropped 3.2 basis points to 4.647%, after falling as low as 4.626%. U.S. crude fell 7.71% to $82.42 a barrel, and Brent slipped 8.9% to $88.17, after both prices retraced from recent highs.
Despite the lower oil prices, traders have remained focused on the Fed path. Reuters said the 10-year yield was up about 23 basis points for the month, on track for its largest monthly increase since March when the Iran war began, and expectations for a rate hike of at least 25 basis points on Wednesday rose to 37.9% according to CME FedWatch.
Markets also priced an 80.8% chance of a hike at the Fed’s September meeting. Reuters added that the 30-year yield fell 3.3 basis points to 5.129%, and the 2-10 year part of the yield curve remained positive at 32.5 basis points.
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