Yields on U.S. Treasury notes fell on Thursday as the United States and Iran agreed to extend their ceasefire by 60 days, aiming to end a three-month-old conflict. The decline in yields followed mixed U.S. economic data showing weaker growth and steady inflation, potentially easing pressure on the Federal Reserve to adjust interest rates.
The yield on the benchmark U.S. 10-year Treasury note decreased by 2.4 basis points to 4.457%, while the 30-year bond yield also fell by 2.4 basis points to 4.987%. The two-year Treasury yield, which often aligns with interest rate expectations, dropped by 0.8 basis points to 4.025%. A $44 billion auction of 7-year Treasury notes showed demand slightly above average.
Earlier, Iran targeted a U.S. air base in Kuwait after a U.S. strike on an Iranian drone operation, highlighting the fragile nature of negotiations. The conflict has disrupted global fuel supplies and influenced U.S. monetary policy outlook.
“What the numbers point to today is simply that we have a stagflation problem.”
Peter Cardillo, chief market economist at Spartan Capital Securities
St. Louis Federal Reserve President Alberto Musalem indicated that the central bank might need to raise its policy rate if inflation does not ease within six months. Meanwhile, U.S. economic data revealed a slowdown in new home sales in April, with further trade balance data expected.
"What the numbers point to today is simply that we have a stagflation problem," said Peter Cardillo, chief market economist at Spartan Capital Securities.
Background
The U.S.-Iran ceasefire extension is a significant development in international relations, affecting global markets and economic policies. The ongoing conflict has had a substantial impact on fuel supplies and economic stability.
Looking ahead, market participants will closely watch further developments in U.S.-Iran relations and upcoming economic data releases, which could influence Federal Reserve policy decisions.
