U.S. Treasury Yields Fall as Rate-Hike Bets Ease After Iran War Deal

U.S. Treasury yields declined across maturities after an agreement was reached to end the war involving Iran, prompting investors to scale back expectations for further Federal Reserve rate increases. According to Jin10, the biggest drop was in short-dated yields, which are typically most sensitive to shifts in monetary policy. Interest-rate swaps indicated traders put the probability of a 25-basis-point Fed hike before December at about 60%, down from roughly 80% last Friday. The move in Treasuries was linked to market optimism that resolving the Iran conflict would help reopen the Strait of Hormuz and push oil prices lower. Matthew Haupt, a hedge fund manager at Wilson Asset Management in Sydney, said some short positions in rates markets were likely to be covered. Haupt added that central banks could take a more moderate stance because they can afford to wait and look past any short-term inflation.