The yield on the US 10-year Treasury note eased to 4.43% on Tuesday, as a modest pullback in oil prices provided some relief, though sentiment remained highly sensitive to developments in the Middle East. US President Trump said that Israel and Hezbollah had agreed to halt attacks against each other in Lebanon and that talks with Iran were ongoing.
On Monday, borrowing costs had climbed after Iran’s Tasnim news agency reported that Iranian negotiators were suspending talks with the US following Israeli strikes in Lebanon, with Tehran also said to be weighing a complete closure of the Strait of Hormuz.
Investors are now looking ahead to key labour market releases later this week, including the US jobs report, which is expected to be pivotal in shaping expectations for Federal Reserve policy under its new chair, Kevin Warsh. Futures markets currently imply around 17 basis points of rate increases by year-end, suggesting roughly a 70% chance of a 25-basis-point hike, with a full hike priced in by March 2027.