FX.co ★ US 10-Year Yield Holds Retreat

The yield on the US 10-year Treasury note hovered near 5.23% on Friday, extending its retreat from 24-year highs after a well-received 30-year bond auction. The strong demand for long-dated government securities indicated that investors remain willing to buy longer-term US debt despite the recent market selloff.

At the same time, investors weighed the impact of easing oil prices after President Donald Trump said the US was engaged in “productive discussions” with Iran and would refrain from attacking the country before the midterm elections.

In interest rate markets, traders are pricing in roughly an 82% probability that the Federal Reserve will leave rates unchanged this month, while the odds of a rate hike in December stand at about 81%.

On Thursday, Fed Governor Christopher Waller signaled that additional rate increases will likely be needed to return inflation to the central bank’s 2% target. However, he stressed that policymakers have “flexibility” regarding the pace of tightening, leaving open the possibility of a pause at the Fed’s upcoming October meeting.