US Treasury yields climb along the curve on Thursday as media reports that the Iran-Oman deal would ban US and Israeli ships from entering the Strait of Hormuz drive crude prices higher, while traders await the latest employment report.
US yields climb as Iran-linked shipping risks lift crude prices, reinforcing inflation concerns before NFP
Fars News agency reported that Iran is blocking US and Israeli vessels from entering Hormuz, triggering a jump in Oil prices. West Texas Intermediate (WTI), the US crude benchmark, rises by over 2.85%, trading at around $76.45 per barrel.
At the same time, reports of attacks on Saudi tankers in the Red Sea keep investors uneasy as Houthis continued to launch strikes against Saudi Arabia.
Money markets continued to speculate that the Federal Reserve (Fed) would raise rates at the September meeting. The odds stand near 58% for a 25 basis points (bps) rate hike, while there’s a 42% chance for keeping rates at the current 3.50%–3.75% range, according to Prime Terminal.
The US 10-year Treasury note is yielding 4.672%, up nearly six basis points, a signal that market participants had begun to price in a possible jump in inflation, which would warrant a rate hike by the Fed.
On Wednesday, San Francisco Fed President Mary Daly said she favors keeping monetary policy unchanged and that the central bank needs to gather additional data before committing to a decision. Meanwhile, Fed Governor Lisa Cook stated that she supported holding rates, but added that if disinflation stalls, she would be ready to act.
Data-wise, the US economic schedule showed that the labor market remains solid, as Initial Jobless Claims for the week ending August 1 came at 199K, below the 202K forecast by analysts. The US Challenger job cuts showed that layoffs dropped to a two-year low in July, consistent with a stable labor market.
Traders’ focus shifts to Nonfarm Payrolls, which are expected to come at 80K, almost double June’s print. Alongside this, the Unemployment Rate is projected to remain steady at 4.2%.
US Treasury yields – chart
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