Yields climb on growing geopolitical tensions. Treasury yields surged today on rising concerns about oil prices amid renewed threats of imminent US strikes on Iran and NATO discussions about guiding ships through the Hormuz Strait. Futures markets now have a 25 bp rate hike fully priced by next January and two hikes as the most likely outcome by July 2027. The policy-sensitive 2-year yield closed 7 bps higher at 4.12% while the 30-year yield closed 6 bps higher at 5.18%, its highest level since 2007. Meanwhile, equities continued yesterday’s slide, with the S&P 500 and NASDAQ closing 0.67% and 0.84% lower, respectively.
NATO considering mission to escort ships through Hormuz Strait. A senior official said today that NATO is discussing sending ships to escort commercial vessels through the Strait of Hormuz if it remains closed past July. The proposal reportedly has support from several member states, though it would require unanimous approval to pass and some countries remain wary of being drawn into the conflict. If enacted, the proposal would mark a significant shift from NATO’s current stance of non-involvement while fighting continues around the strait. However, growing economic concerns over a prolonged closure are pushing allies to reconsider. It also remains unclear how NATO would guarantee safe passage, especially given that a similar US effort was abandoned after only a few days.
Pending home sales rises for third consecutive month. Pending sales of preowned homes increased 1.4% in April to a five-month high of 74.8 in the National Association of Realtors’ contract signing index, marking the third consecutive increase and highlighting growing demand. Chief Economist at NAR, Lawrence Yun, said, “Buyers are coming out with cautious optimism despite increasing economic uncertainty and a slightly rise in mortgage rates.” Financing costs in April eased slightly against March’s 6.57% average 30-year mortgage rate, which was the highest level since August.
