FX.co ★ US 10-Year Yield Edges Higher

The yield on the US 10-year Treasury note rose to around 4.54% on Wednesday, rebounding after coming under pressure in the previous session. The move came as renewed hostilities in the Middle East threatened a fragile ceasefire and the prospects for a lasting peace agreement, intensifying concerns about inflation and the future path of interest rates.

The US carried out “self-defense strikes” against Iran following the downing of an American helicopter, while Iranian Foreign Minister Abbas Araghchi warned that Iran’s armed forces would respond to any attack or threat. The resulting increase in energy prices driven by the regional conflict amplified fears of persistent inflation and the risk of additional central bank rate hikes.

At the same time, investors looked ahead to the latest US inflation data for further signals on the Federal Reserve’s policy outlook, after stronger-than-expected employment figures last week reinforced expectations of an interest rate hike before year-end.