Yields rise despite US-Iran progress. Treasury yields climbed over the course of the session despite reported progress in US and Iran peace talks and sliding oil prices. Yields ultimately closed 5-6 bps higher across the curve, with the 2-year yield at 4.23% and the 10-year yield at 4.51%. Meanwhile, equities declined as SpaceX plummeted over 16%, with the S&P 500 and NASDAQ down 0.37% and 1.32%, respectively.
US, Iran make strong peace deal progress. The US has suspended oil sanctions on Iran for 60 days, allowing the nation to sell at market prices, increase exports, and sell to American importers. The reversal marks a major change in US policy as the two nations work towards a final peace deal, following the memorandum of understanding that was signed last week. The MOU remains fragile due to ongoing fighting by Israel in Lebanon, which jeopardizes the Strait of Hormuz remaining open. Vice President JD Vance attended negotiations in Switzerland over the weekend and said they went “very very good.” Vance also claimed that Iran agreed to let nuclear inspectors back into the nation, which Iranian officials have said is “false and does not reflect reality.”
Lagarde sees inflation returning to target. European Central Bank President Christine Lagarde said today that she anticipates the ECB will not need to act aggressively to control the impacts of the war in Iran, as she sees inflation returning to the 2% target in the medium term. She noted that while households will likely face near-term price gains, longer-term inflation expectations remain anchored at around 2% “with appropriate monetary-policy action.” Lagarde elaborated, saying, “We see no evidence yet of de-anchoring of inflation expectations or second-round effects that would warrant a more forceful policy response at this stage.” Futures markets are currently pricing one rate hike by the end of the year, in addition to the ECB’s 25 bp rate hike earlier this month.
