U.S. Treasury yields again edged lower on Thursday and oil prices fell, even as new U.S. figures reflected sustained inflation, following reports that U.S. and Iranian negotiators had agreed to extend the ceasefire.
The yield on the 10-year Treasury note, a key measure for mortgages, auto loans and credit card debt, fell nearly 3 basis points to 4.453%.
The yield on the two-year Treasury note, which is most sensitive to the Federal Reserve’s short-term interest rate decisions, fell nearly 1 basis point to 4.025%. The yield on the 30-year Treasury note, which is typically most sensitive to geopolitical risks, fell 3 basis points to 4.98%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
Oil fell from the day’s highs after Axios reported that U.S. and Iranian negotiators had agreed to extend a three-month cease-fire in the war and begin talks on Iran’s nuclear program. According to the report, President Trump has not yet given final approval to the deal.
West Texas Intermediate crude oil futures were last up 0.55% Thursday at just above $89 per barrel, while Brent crude oil futures were trading below $94 per barrel. It rose earlier in the day following Iranian attacks on U.S. military bases.
At the same time, new economic indicators released on Thursday pointed to persistent price pressures. The Federal Reserve’s recommended inflation measure, the Personal Consumption Expenditure Price Index, rose 3.8% in April from a year earlier. In addition, although the rate of increase in yields has slowed as the statistics have been in line with expectations, some are concerned that upward pressure on inflation continues.
“If economic officials in Washington are looking for evidence to support the claim that there is no cost-of-living crisis in the U.S., they will need to look elsewhere, as PCE consumer inflation was still heating up in April as the Iran war drove up energy costs,” said Chris Rupkey, chief economist at FWD Bonds.
