Yields drop as Iran deal nears finish line. Treasury yields fell across the curve as markets priced in the increasing likelihood of a finalized US-Iran peace deal, capping off the best week for Treasuries since the war began. The 2-year yield closed 2 bps lower at 4.00% and the 10-year yield closed 1 bp lower at 4.44%, both down 12 bps on the week. Equities rallied, with the S&P 500 and NASDAQ closing 0.22% and 0.20% higher, respectively. Oil retreated further as the prospect of restored Hormuz traffic pulled risk premium out of energy markets, with Brent crude down almost 2%, at $92 per barrel.
Trump weighs final approval of US-Iran agreement. US and Iranian negotiators came to a tentative ceasefire extension deal yesterday, with the focus now on whether President Donald Trump will approve it. Trump and the White House sent mixed signals today as Trump posted on social media that he was ready to make a “final determination,” but then hours later, left the Situation Room meeting with no final decision made. Trump’s social media post also reemphasized that a deal needs to involve Iran to never have a nuclear weapon and for the Strait of Hormuz to reopen without tolls. Vice President JD Vance also told reporters that both sides were still “going back and forth on a couple of language points.”
Bowman pushes back against hawkish Fed pivot. Fed Vice Chair for Supervision Michelle Bowman believes it is too soon to judge the inflationary impact of the US-Iran conflict. Bowman said that reacting to temporary energy driven inflation would add “unwarranted policy restraint,” weighing unnecessarily on economic activity and the labor market. She voiced support for the April FOMC post-meeting statement retaining easing-bias language, at odds with other Fed members who dissented in favor of removing it. Bowman’s comments arrive a day after the April PCE print showed headline inflation at 3.8% YoY, the highest reading since May 2023.
