US Treasury yields fall as Hormuz progress eases inflation fears

US yields edge lower across the whole curve on Tuesday, following suit. Oil prices are pressured lower as positive developments in the Middle East seem to ease inflationary pressures, while market participants digest the implications of the US Treasury Department's decision to extend the bond buyback program to curb the US 30-year yield.

US yields decline as Oil drops and traders await Core PCE

Oil prices tumbled more than 3% on Tuesday after the US Treasury imposed sanctions on 60 entities linked to Iran on Monday. 

However, recent developments in the Middle East include the Pakistan Army Chief Munir conveying an offer from the US to Iran that includes halting the blockade in the Strait of Hormuz in exchange for opening the Strait and stopping proxy attacks, Al Arabiya/Al Hadath sources report. Iran denied those claims, adding that Munir was seeking to open the space for further negotiations and to convey Iran’s conditions and positions to the US.

The White House announced the removal of mines in the Strait of Hormuz, which was confirmed by two US officials, as reported by Axios.

Aside from this, the US economic docket revealed that the jobs market remains solid, after the ADP Employment Change 4-week average improved sharply. At the same time, US Building Permits in July showed an improvement, while US households grew less confident regarding the financial and economic conditions in the country

Now eyes shift to the release of the Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, on Wednesday. Alongside this, traders are looking for jobs and growth data, and the speech of the Fed Chair, Kevin Warsh.

The US 2-year T-note yield tumbles nearly five basis points at 4.193%, while the US 10-year benchmark note drops six basis points at 4.635%.

US 10-year Treasury note daily chart