The yield on the US 10-year Treasury note inched up to 4.57% on Monday, after falling about 7 basis points the previous week, as investors continued to weigh developments in the Middle East and their implications for the economic and monetary policy outlook. Tensions between the US and Iran intensified over the weekend, pushing oil prices to six‑week highs before they surrendered most of those gains, following comments from Iran’s foreign ministry suggesting talks with the US could resume if Iran’s national interests are respected.
Last week’s CPI and PPI data both came in softer than expected, but the latest rise in oil prices has stoked concerns that the disinflation trend could stall. Markets are still pricing in one Federal Reserve rate hike this year, with the probability of a September move holding above 60%. In the meantime, Fed officials have entered the blackout period ahead of next week’s FOMC meeting, where policymakers are widely expected to leave the federal funds rate unchanged.