Markets whipsaw on Iran news. Yields closed mixed today after a choppy session that was driven by shifting optimism for a US-Iran peace deal. Yields initially jumped 4-5 bps on an early morning report that Iran wanted to keep its enriched uranium, but later declined to intraday lows on news that a draft peace agreement was expected to be announced in a few hours. Yields then climbed into the market close as Iranian President Masoud Pezeshkian said on state TV that they won’t back down in negotiations. The 2-year yield closed 3 bps higher at 4.08%, while the 10-year yield closed 2 bps lower at 4.57%. Meanwhile, equities closed slightly higher, with the S&P 500 and NASDAQ up 0.17% and 0.09%, respectively.
US-Iran negotiations progress, though key sticking points remain. Iran still needs to formally respond to the latest peace proposal from the US, though a semi-official Iranian news agency reported that the latest agreement “has narrowed the gaps to some extent.” Despite progress on that end, Supreme Leader Mojtaba Khamenei ordered the country’s enriched uranium to stay in Iran and Iran is working with Oman to create a toll system through the Strait of Hormuz. President Donald Trump told reporters today, “We want it open, we want it free, we don’t want tolls.” Secretary of State Marco Rubio added that a toll system in the strait would make a peace agreement “unfeasible.”
US manufacturing hits a four-year high. US manufacturing activity surged in May with manufacturing PMI rising to 55.3, an 0.8-point increase from April and the largest monthly gain in four years. A gauge of prices paid for inputs jumped 11 points to its highest level since June 2022. Composite measures of both input and output prices also climbed to four-year highs, reflecting notable increases in the cost of goods alongside rising services prices. Today’s print was driven in part by customers stockpiling inventory to get ahead of price pressures tied to the war in Iran amid mounting inflation concerns.
