Yields lower as US-Iran near deal. Treasury yields ended the day lower across the curve as a possible ceasefire extension was announced between the US and Iran, though the deal is pending final approval. Yields initially climbed overnight as the US launched additional strikes in the Middle East before dropping ~7 bps this morning on in-line PCE data and the announcement of a potential peace deal. The 2-year yield closed 1bp lower at 4.02%, while the 10-year yield closed 4 bps lower at 4.45%. Meanwhile, equities rallied to new all-time highs on signs of progress in the war, with the S&P 500 and NASDAQ closing 0.58% and 0.91% higher, respectively.
US, Iran reach tentative truce extension. The US and Iran reportedly reached a 60-day ceasefire extension pending President Trump’s approval, according to an anonymous US source. When asked about a potential agreement today, Treasury Secretary Scott Bessent said “the teams have been going back and forth,” adding that Trump’s three conditions — the Strait of Hormuz reopening, Iran relinquishing its enriched uranium, and Iran ending its nuclear program — would have to be part of any deal. Bessent added, “If there can be no deal without those, why would there be a deal without those?” According to an Iranian news agency, Fada-Hossein Maleki, a member of Iran’s parliamentary commission for national security, said that negotiations between the two nations made “significant progress.”
April PCE data avoids a blowout. The Fed’s preferred inflation gauge rose 0.4% in April, below estimates of a 0.5% increase and the prior month’s 0.7% jump. On an annualized basis, PCE reached its highest reading since May 2023 at 3.8%, on par with estimates and above March’s 3.5%. Excluding volatile food and energy prices, core PCE rose 0.2% MoM and 3.3% YoY. Surging gas prices, which rose 5.5% in April, contributed to a 0.7% MoM rise in goods prices. Meanwhile, services costs rose 0.3%, as housing prices and utilities increased 0.6% and 0.5%, respectively. Also released today, Q1 GDP grew 1.6% QoQ, below estimates and the prior period’s 2.0%.
