FX.co ★ US 10-Year Yield Extends Drop

The yield on the 10-year US Treasury note declined to 4.47%, pulling back sharply from the 16‑month high of 4.7% reached on May 20th, as falling energy prices tempered expectations for higher inflation. Iran confirmed it is in possession of an unofficial draft peace agreement that would restore tanker and commercial shipping through the Persian Gulf within a month. This came shortly after the US administration signaled it was nearing an agreement to end the conflict with Iran. The resulting drop in energy prices and perceived inflation risks reduced the likelihood that the Federal Reserve will raise interest rates this year.

Still, the core PCE price index — the Fed’s preferred measure of underlying inflation — is expected to rise in April to 3.3%, its highest level in more than two years. At the same time, leading labor market indicators continue to point to resilience, with weekly ADP data remaining above their recent average and reinforcing the picture of a still-strong labor market.