USA: 10-Year Treasury Yield Hovers at 4.5%

The yield on the US 10-year Treasury note traded below 4.5% on Thursday, retreating from session highs of 4.53%, as investors continued to assess the evolving situation in the Middle East and conflicting signals surrounding a potential agreement between the US and Iran that could end the war and reopen the Strait of Hormuz. Meanwhile, both headline and core PCE inflation readings came in below expectations at 0.4% and 0.2% mom, respectively, although annual rates remained well above the Fed’s target, at 3.8% and 3.3%. Personal spending rose as expected in April, while Q1 GDP growth was revised lower. On the monetary policy front, Fed Vice Chair Jefferson warned that inflation risks remain tilted to the upside, while Minneapolis Fed President Kashkari said consumer prices are still “much too high”. Traders worry that higher energy prices stemming from the closure of the Strait of Hormuz could keep inflation elevated and force the Fed to maintain higher interest rates for longer.