Yields close nearly unchanged as Trump threatens escalation. Treasury yields traded in a ~4 bp range today with a muted reaction to President Trump’s threats of imminent military action on Iran. Yields closed nearly flat across the curve, with the 2-year yield at 3.85% and the 10-year yield at 4.33%. Oil remained elevated, hitting intraday highs shortly after market open on Sunday night, though the move partially retreated, with WTI now trading around $113/barrel and Brent around $110/barrel. Meanwhile, equities ultimately rose today after a volatile session as markets digested developments in the Middle East. The S&P 500 and NASDAQ closed 0.44% and 0.54% higher, respectively.
Trump threatens more attacks on Iran, extends deadline for Hormuz deal. President Trump threatened to escalate US attacks on Iran in a Truth Social post yesterday, saying he would target bridges and power plants while adding today that the “entire country” might be “taken out in one night.” In response, Tehran warned that such attacks would trigger consequences that extend beyond the Middle East. The new threats come as President Trump extended his deadline to reach a deal to reopen the Strait of Hormuz, pushing it back to Tuesday from Monday. However, he said, “It’s not going to be moved again. I gave them a chance, and I hope they take the chance.” According to IRNA, Iran’s state run media, the country rejected a proposed 45-day ceasefire, instead demanding a permanent end to the conflict.
ISM sees slowed services growth and elevated prices. The March ISM Services Index came in at 54 today, below expectations of 54.9 and February’s 56.1. Services activity was in part dragged down by weaker employment, with the employment gauge declining to 45.2 from 51.8 previously. Meanwhile, the prices paid index jumped to 70.7, surpassing expectations and a significant increase from 63 last month. This 7.7-point jump is the largest in nearly 14 years. Steve Miller, chair of the ISM Services Business Survey Committee, said, “The predominant commentary this month was about impacts and adjustments due to the conflict with Iran and the expected flow through of higher oil prices at some point.” Miller noted that many industries reported higher energy prices, and increased inventories in preparation for potential supply chain disruptions from oil price shocks.
