Treasuries-US bonds trim gains as prospects for Iran deal fade; inflation data looms

Investors are also awaiting key inflation data — the U.S. Consumer Price Index — due on Wednesday, which could determine the path of interest rates. "If you know where oil prices and CPI are going, you can tell where Treasury yields are going as well," said Stan Shipley, fixed income strategist at Evercore ISI in New York. He noted, though, that long-term break-even inflation is well contained, which means the market thinks the Federal Reserve will get prices under control. "Maybe we have some problems in the short term here over the next year, but the long term over the next 10 years is fine. So unless inflation blows out again, I don't think the 10-year is going to go through this 4.70% hurdle." Consumer prices are expected to edge up 0.1% in July after falling 0.4% in June, according to a Reuters poll. Annual CPI inflation is forecast to slow to 3.4% from 3.5% a month earlier. Core CPI, which excludes volatile food and energy prices, is also projected to rise 0.2% on the month, from an unchanged reading in June, with annual core inflation seen easing to 2.5% from 2.6% the previous month. The headline U.S. Producer Price Index is expected to increase 0.2% in July after declining 0.3% in June. On an annual basis, PPI inflation is forecast to ease to 4.9% from 5.5% in June. PPI data is due on Thursday. In other parts of the bond market, the yield curve was little changed on Tuesday ahead of the CPI and PPI numbers, with the gap between 2-year and 10-year yields at 46.4 bps US2US10=TWEB, compared with 46.2 bps late Monday. Earlier in the session, the curve hit 47.6 bps, its steepest level since May 22. The curve showed a bull steepener, a scenario in which short-term interest rates are falling a little faster than longer-dated ones. Going into the CPI data, U.S. rate futures priced in on Tuesday a 48% chance of a hike at the Fed's policy meeting next month, down from a 52.2% probability late on Monday. Traders are also expecting just 29.7 basis points of tightening this year. Tuesday's auction of three-year notes was well received, with the debt pricing at 4.291%, below forecasts, indicating investors did not demand a premium to absorb the supply. The bid-to-cover ratio, a gauge of investor appetite, was 2.71 times, higher than the 2.61 average. U.S. 3-year yields have risen around 11 bps since the last auction and Jay Barry, head of global rates strategy at J.P. Morgan, pointed out in a research note that the sector "appears fairly valued after adjusting for the level of rates and the shape of the curve over the last three to six months." Following the 3-year note auction, three-year yields declined 1.5 bps to 4.291% US3YT=RR. U.S. Treasuries pared earlier gains on Tuesday as initial optimism over a potential U.S.-Iran agreement waned after an Iranian official said the Strait of Hormuz would remain closed unless the United States met the country's demands. In afternoon trading, the benchmark 10-year yield slid less than a basis point to 4.690% US10YT=RR, while U.S. 30-year bond yields were little changed at 5.241% US30YT=RR. Yields move inversely to prices. On the shorter end of the curve, the yield on 2-year notes US2YT=RR, which are sensitive to market expectations for Federal Reserve rate moves, slipped 1.7 bps to 4.222%. Treasury's $58 billion auction of three-year notes was absorbed smoothly on Tuesday, paring declines in yields on the front end of the curve. U.S. yields came off their lows after the newly appointed secretary of Iran's Supreme National Security Council said the strait will remain closed as long as the U.S. does not change its behavior and accept Iran's conditions to end the war. U.S. crude futures settled higher as a result, rising 1.3% to $83.20 per barrel CLc1. Iran's comments offset an earlier report from Bloomberg that the United States and Iran were close to "some sort of an arrangement," citing Pakistan's Defence Minister Khawaja Asif.

Treasuries-US bonds trim gains as prospects for Iran deal fade; inflation data looms

CPI and PPI data in focus

Yield curve remains little changed

September rate hike odds and auction results

Treasuries pare gains as Iran deal hopes fade

Related News

Mount Logan catat rugi bersih kuartal II FY26 melebar menjadi $ 4,18 juta; revenue turun 49% menjadi $ 8,75 juta

Illinois Tool Works Prices $1.50 Billion Senior Notes Due 2029 At 4.650% Coupon

Ferguson Prices $1.2 Billion Of Senior Unsecured Notes

NextPower CEO Daniel S. Shugar lepas 67.636 saham senilai USD 6,96 juta

TXO Partners 10% owner-director Bob R Simpson akuisisi unit senilai USD 3,54 juta