FX.co ★ 10-Year Yield Drops Approaches 2-Month High

The yield on the 10-year US Treasury note climbed to 4.60% on Thursday, nearing the almost two‑month high of 4.62% reached on July 13, as markets positioned for a potential Federal Reserve rate hike later this year. A renewed bout of hostilities between the US and Iran pushed benchmark fuel prices higher, reviving concerns about energy-driven inflation reminiscent of last quarter’s surge that has fueled price increases since March.

These developments coincided with signs of continued economic strength. Retail sales maintained a solid pace of growth in June, particularly when excluding the impact of lower fuel receipts stemming from a temporary dip in energy prices. In addition, initial jobless claims fell to their lowest level in more than two months. This combination of an elevated inflation outlook and a resilient labor market has led the FOMC to signal the likelihood of another rate hike this year, in line with current pricing in interest rate derivatives markets.