FX.co ★ Treasury Yields Edge Down as Oil Prices Fall

The yield on the US 10-year Treasury note declined about 4 bps to 4.46% on Thursday, nearly erasing the 6 bps increase seen in the previous session. Treasuries found support as oil prices retreated on growing hopes that a ceasefire between Israel and Lebanon could open the door to a broader agreement involving Iran.

Still, uncertainty remains high and the situation is extremely fragile, with oil prices holding well above pre-conflict levels. Investors are also continuing to factor in the risk of another Federal Reserve rate hike before year-end, potentially as early as October, as elevated energy costs sustain inflationary pressures.

At the same time, recent labor market data have underscored the resilience of the US economy, with employment conditions improving over the past two months. Friday’s jobs report is expected to shed further light on the underlying strength of the labor market and the resulting implications for the Fed’s policy path.