U.S. Treasury yields declined on Wednesday, coinciding with a significant drop in Brent crude oil prices to levels not seen since before the Iran war began, as investors awaited the release of key inflation data scheduled for Thursday [1]. The yield on the 10-year U.S. Treasury note, a benchmark for government borrowing costs, fell by 1 basis point to 4.483%, while the 2-year Treasury note yield remained broadly flat at 4.199%. The 30-year Treasury bond yield also decreased by over 1 basis point to 4.924% [1].
Brent crude futures for August delivery dropped 1.7% to $75.79 per barrel, marking their lowest point since February 27, the day before the U.S. and Israeli-led war against Iran began. Similarly, U.S. West Texas Intermediate futures for August were down 1.7% at $71.98 per barrel [1]. The decline in oil prices was attributed to easing concerns over potential supply disruptions, as maritime traffic through the Strait of Hormuz is expected to return to normal. The International Maritime Organization announced that more than 11,000 seafarers stranded in the Persian Gulf will begin exiting through the Strait after safety guarantees were secured. IMO Secretary-General Arsenio Dominguez stated, "We have secured the necessary safety guarantees and have thoroughly verified the conditions for safe navigation to support these operations" [1].
Looking ahead, the market is focused on the upcoming release of May's personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge. Economists polled by FactSet expect core PCE, which excludes volatile food and energy prices, to increase from April [1]. This data is seen as a key test for Treasuries and could influence future market direction.
CONCLUSION
Treasury yields edged lower as oil prices retreated to pre-war levels and maritime traffic in the Persian Gulf showed signs of normalization. Investors are now turning their attention to Thursday's PCE inflation data, which is expected to provide further direction for the bond market.