US Treasury yields climbed on Monday, driven by a surge in oil prices and renewed concerns about inflation ahead of the upcoming US Consumer Price Index (CPI) release this week [1]. The yield on the US 10-year benchmark note increased by nearly six basis points to 4.705%, as West Texas Intermediate (WTI) crude oil jumped over 6.70% to $82.29 per barrel [1]. This move in yields comes after headlines indicated that Iran has ruled out talks with former President Trump and will wait until his term ends in 2029, dampening hopes for a swift reopening of the Strait of Hormuz and contributing to higher energy prices [1].
Market participants are closely watching July's CPI, which is expected to decline slightly from 3.5% to 3.4% year-over-year, while the core CPI is projected to decrease from 2.6% to 2.5% year-over-year [1]. The Producer Price Index, set for release the following day, is also anticipated to ease [1]. Last week's US Nonfarm Payrolls report showed the economy cutting 23,000 jobs, with downward revisions for May and June totaling 100,000 jobs, leading investors to scale back expectations for Federal Reserve rate hikes [1].
According to Prime Terminal data, the probability of the Federal Reserve keeping rates unchanged at its September meeting stands at 65%, while the likelihood of a 26-basis-point rate hike is at 35% [1]. The US Dollar Index (DXY) rose 0.20% to 99.81, reflecting some support for the dollar amid these developments [1]. In addition to inflation data, traders are monitoring Initial Jobless Claims for the week ending August 8 and the University of Michigan Consumer Sentiment survey for further economic signals [1].
CONCLUSION
US Treasury yields rose sharply as oil prices surged and inflation concerns intensified ahead of key economic data releases. Market participants are now less certain about further Federal Reserve rate hikes, with a majority expecting rates to remain steady in September. The upcoming CPI and PPI data, along with labor market indicators, will be closely watched for further direction.