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Geopolitical tensions between the U.S. and Iran are driving up Treasury yields as oil prices remain firm. The 10-year Treasury yield rose above 4.559%, while the 2-year yield also saw an increase. Oil prices remained steady despite concerns over the Strait of Hormuz.
Treasury yields experienced an uptick on Thursday, influenced by persistent geopolitical tensions between the United States and Iran, which kept oil prices at elevated levels. The benchmark 10-year U.S. Treasury note yield climbed by over 1 basis point, reaching 4.559%. The 2-year Treasury note yield, a closer indicator of the Federal Reserve's short-term interest rate policies, saw a more significant rise of more than 2 basis points, settling at 4.153%. The yield on the longer-term 30-year Treasury bond also edged higher, adding less than 1 basis point to 5.087%. It is important to note that a basis point is equivalent to 0.01%, and bond yields move inversely to their prices.
Meanwhile, oil prices remained relatively stable on Thursday, with traders closely observing any new threats to maritime passage through the critical Strait of Hormuz. Brent crude futures saw a marginal decrease, trading just above $84 a barrel, while U.S. West Texas Intermediate futures experienced a slight dip, closing above $78 a barrel.
The latest economic indicators continue to paint a picture of a resilient U.S. consumer, managing the pressure of increased prices. Weekly jobless claims for the period ending July 11th registered at 208,000, a figure lower than the 218,000 anticipated by economists surveyed by Dow Jones. Retail sales data met expectations, showing a modest 0.2% increase.
Earlier in the week, bond markets received a supportive signal from a disinflationary reading. Wednesday's producer price index for June fell by 0.3%, a softer outcome than the flat reading economists had predicted. Despite these inflationary signals, Dallas Federal Reserve President Lorie Logan reiterated the need for "modestly" higher interest rates, emphasizing that "every month of above-target inflation has compounded the strain on Americans' budgets." While she did not explicitly state support for a rate hike at the upcoming Federal Open Market Committee meeting this month, her remarks underscore ongoing concerns about inflation.
