Traders and investors are all gearing up for the US CPI report to come later in the day. And that is seeing a bit of a breather in broader markets, following the risk selloff from yesterday. That owes much to US-Iran developments, as tensions flare up again in the Middle East.
But even so, the bond market is quietly making its move today still. 10-year Treasury yields are now climbing up to 4.63%, its highest since the end of May. That as renewed inflation fears is helping to spark a further shift in the Fed outlook ahead of the inflation numbers today.
The high in May was seen around 4.68% and that will be in focus as we look to the days/weeks ahead now. At the same time, 30-year yields in the US are also touching 5.11% today – up nearly 30 bps from three weeks ago. That shows that the long-end of the curve is once again starting to heat up.
As for the short-end, we are seeing more striking moves. 2-year yields in the US are now up to 4.29%, its highest since February 2025. That comes as traders are also now fully pricing in a 25 bps rate hike by September for the Fed.
Circling back to the US CPI report coming up later, I would want to point out a word of caution. The numbers will be for June and that may see more depressing elements in terms of energy prices as the US-Iran conflict settled down with both sides eventually signing off on a ceasefire deal. However, that has all been blown into dust now as we get into July and we are seeing a resurgence in energy prices this past week.
The other caveat is that there will be a slight boost in the numbers, especially core prices, owing much to the World Cup effect. That will indirectly feed into higher price pressures for food and lodging especially, so it is a bit of a one-off with that also feeding a bit into July.
But in looking past that boost, the fact that the Strait of Hormuz is now closed again is a big worry to the inflation outlook. And that kind of angst is now already being translated into the bond market. In turn, that will also have broader market ramifications with bonds often being the tail that wags the dog.
This article was written by fl9bde53b91e184082bbe3aa3acaaf2cb0 at investinglive.com.
