Treasuries-yields rise as Iran conflict overshadows quiet data week

Energy prices are now higher than they were at the June Fed meeting, when the majority of the committee was projecting rate hikes, said Michael Lorizio, head of U.S. rates and mortgage trading at Manulife Investment Management.

“With the repricing that we've seen in oil and gas and the dovish shift that we saw after the last Fed meeting, we have to maybe revisit some of the thinking that was in place before the de-escalation in Iran,” Lorizio said.

Inflation expectations had fallen after the U.S. and Iran reached a ceasefire deal in mid-June, and eased further after data last week showed consumer price inflation moderated more than expected in June. Those expectations are now climbing off their lows as the conflict intensifies once again.

The 2-year note US2YT=RR yield, which typically moves in step with Fed interest rate expectations, rose 3.38 basis points to 4.249%.