Treasury yields fall as oil dips on Strait of Hormuz hopes

The 2-year note yield, which typically moves in step with Federal Reserve interest rate expectations, fell 0.66 basis points to 4.187%, the lowest since July 20. The yield on benchmark U.S. 10-year notes fell 1.23 basis points to 4.615%. The yield curve between 2- and 10-year notes steepened to 42.6 basis points. Fed funds futures traders are pricing in 55% odds of an interest rate hike at the Federal Reserve's September meeting, down from 68% on Monday. Treasury yields fell on Wednesday as oil prices dipped on hopes of the Strait of Hormuz reopening while traders also focused on economic data culminating in Friday's July employment report. U.S. President Donald Trump said there was an "all-day negotiation" on Tuesday with Iran, characterizing the talks positively while also threatening to hit Iran "really hard" if a deal is not reached. A proposed deal between Iran and Oman would give Iran control over ships entering the Gulf through the Strait of Hormuz, a senior Iranian source and two regional officials told Reuters on Wednesday, in one of the biggest concessions yet to Iran. Yields have been whipsawed along with oil prices by alternating bouts of hope and disappointment as a deal to end the Iran war remains unresolved. Concerns about an increase in longer-dated debt sales also eased on Wednesday after the Treasury Department said it will hold its coupon issuance and floating-rate note issuance steady for at least the next several quarters. "It's a positive for the rates market," said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities. "We're not expecting auction size increases until the middle of 2027." The Treasury also said that it continues to evaluate potential future changes to its coupon and floating rate auction sizes, a shift in language from its May refunding announcement when it noted potential future increases to the debt sales. Analysts said that may be a hint that it could reduce sales of longer-dated debt to ease market pressures if long-end yields rise too far. Meanwhile, traders are waiting on Friday's highly anticipated jobs report for July, which is expected to show that employers added 80,000 jobs last month. The unemployment rate is expected to stay steady at 4.2%. Wednesday's ADP private employment report showed an increase of 44,000 jobs in July, down from 95,000 positions added in June and about 25,000 jobs shy of expectations. Wages rose 4.4% from a year ago. Other data showed that the U.S. services sector maintained a strong pace of growth in July, but strong demand is colliding with supply constraints, driving up input costs for businesses.

Treasury yields fall as oil dips on Strait of Hormuz hopes

Benchmark yields and Fed expectations move lower

Yields fall as oil dips and traders watch Iran talks

Treasury issuance guidance and labor data ease pressure

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