US Treasury yields fell on Wednesday, as oil prices plunged on reports that the United States and Iran were closing in on an agreement for a one-page memorandum to end the war in the Gulf region.
A source from mediator Pakistan and another source briefed on the mediation confirmed information initially reported by the US media outlet Axios.
In a social media post, US President Donald Trump gave no details of any specific proposal but said the war could end if “Iran agrees to give what has been agreed to.”
US crude CLc1 plummeted 6.31% to US$95.82 a barrel and Brent LCOc1 slid to US$102.75 per barrel, down 6.48% on the day after the reports.
“The idea here is that we’re seeing some movement towards a resolution in the Middle East obviously gets everybody excited,” said Thomas Urano, co-chief investment officer at Sage Advisory in Austin.
“We had the initial wave of bombings, it’s certainly slowed down. We’re in the ceasefire zone now, we’re not looking for any sort of excuse to ramp it back up. And it’s in the best interest of both parties and the rest of the world, just to kind of let this settle down.”
The yield on the benchmark US 10-year Treasury note fell 5.8 basis points to 4.358% after falling to 4.334%, its lowest since April 27.
Urano also said the exceptionally strong US corporate earnings season, powered in large part by AI spending, was supporting growth and keeping expectations for rate cuts from the Federal Reserve at bay, which helped to curb the decline in yields.
Since the US-Israeli war with Iran began at the end of February, yields have steadily climbed as worries about higher prices have dented market expectations for rate cuts from the Federal Reserve this year.
The yield on the 30-year bond fell 4.1 basis points to 4.941%. The 30-year had hit 5.036% on Monday, its highest since July 17.
Quarterly refunding set at US$125 billion
The US Treasury Department announced on Wednesday total quarterly refunding of US$125 billion from May to July, aimed at raising new cash of US$41.7 billion from private investors, and would keep its coupon and floating rate note auction sizes steady for at least the “next several quarters.”
A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 48.0 basis points.
St Louis Fed President Alberto Musalem said the risks to monetary policy have shifted towards higher inflation, possibly requiring interest rates to stay on hold for some time amid a seemingly stable job market.
Source: Theedgemalaysia