FX.co ★ US 10-Year Yield Holds Advance

The yield on the US 10-year Treasury note hovered around 4.6% on Tuesday, after rising about 5 basis points in the previous session. The move came as escalating tensions between the US and Iran drove oil prices higher, reigniting concerns about inflation and the possibility of further interest rate increases.

US strikes on Iranian targets continued for a tenth consecutive day, with President Donald Trump warning that Tehran would be held responsible for the deaths of three US service members. At the same time, Iran-backed Houthi militants announced a maritime embargo against Saudi Arabia, heightening fears over energy shipments through the Red Sea.

Still, Iran indicated that mediators had presented proposals aimed at easing tensions with the US following several days of hostilities.

In interest-rate markets, traders now assign roughly a 55% probability to a Federal Reserve rate hike in September, up from 51% the previous day. Meanwhile, 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.