Treasury Rally Fizzles as Iran Ceasefire Violation Lifts 2-Year Yield to 3.79%
Treasury two-year note yield rose to about 3.79% after Iranian Parliament speaker said three ceasefire clauses were violated, wiping out earlier gains from a two-week truce that sent oil down over 10%. Interest-rate swaps now imply less than a one-in-three chance of a Fed quarter-point cut by end-2026.
1. Bond Market Reaction
Treasury yields erased early gains after Iranian Parliament speaker Mohammad-Bagher Ghalibaf said three clauses of the two-week ceasefire proposal were violated, lifting the two-year note yield to about 3.79%. The setback followed a rally that had been driven by hopes the truce would ease oil-driven inflation pressures.
2. Fed Rate-Cut Odds Slashed
Interest-rate swaps suggest traders now see less than a one-in-three chance of a quarter-point Fed rate cut by end-2026, down from roughly a 50% probability earlier in the day. US 10-year yields held around 4.3% after dipping to 4.23% as cuts expectations were trimmed.
3. JPMorgan AM Outlook
Myles Bradshaw of JPMorgan Asset Management noted that despite the oil shock’s modest inflation impact, growth risks leave central banks likely to err on the side of caution. He highlighted that reopening of the Strait of Hormuz and volatile Middle East tensions could influence policy decisions.