U.S. Treasury yields tick higher; inflation outlook helps cool hike bets

Oil prices crept back higher as prospects of a sustainable peace deal between U.S. and Iran receded.

U.S. forces hit Iran for a ninth consecutive day on Monday, sparking worries about shipping supply through the Strait of Hormuz.

The U.S. economic docket is light this week and the Fed remains in a blackout period before its policy meeting next week.

U.S. 2-year Treasuries have outperformed the rest of the G7 complex by a wide margin, as investors price in a lower chance of the Fed raising interest rates, compared to a greater probability that other major central banks in energy-importing nations may be forced to do so.

In the last week, 2-year yields have fallen by over 8 basis points, compared with a rise of almost 8 bps in Italian 2-year yields, or a 5.5-bp rise in German yields.