Yields rise as geopolitical risks continue. Treasury yields climbed on uncertainty surrounding the US and Iran, after the US rejected Iran’s ceasefire proposal over the weekend. Indirect talks through mediators occurred today, though oil prices still saw a choppy session, with WTI crude futures trading in a $5 range. Yields closed 6-8 bps higher across the curve, with the 2-year yield at 4.93% and the 10-year yield at 5.24%. Meanwhile, equities slid on worries over potential energy-driven inflation, with the S&P 500 and NASDAQ closing 0.77% and 0.92% lower, respectively.
US rejects Iran peace proposal. Over the weekend, President Trump rejected Iran’s peace agreement proposal, stating, “They want to make a deal, but it is not the deal that I want to make.” Iranian Foreign Minister Abbas Araghchi reiterated that “Our conditions are clear, and any move toward reopening the Strait of Hormuz is contingent on these conditions being met.” US Ambassador to the United Nations, Mike Waltz, added, “The president’s just not confident that the Iranians are coming in good faith.” Oil prices jumped 2.2% on the news, with Brent futures now trading above $105 per barrel. However, negotiations between the two countries reportedly continued today, mediated by Qatari officials and expected to carry through the week.
The week ahead: markets turn to inflation, jobs data. PCE data, the Fed’s preferred inflation gauge, is due Wednesday, with core PCE, which strips out volatile food and energy prices, expected to increase 0.3% MoM and 3.3% YoY in August. Second quarter GDP releases Wednesday as well, with forecasts anticipating annualized growth of 1.5%, while the GDP price index is expected to rise 6.4%. September nonfarm payrolls are then due Friday, with estimates predicting 90k jobs added and the unemployment rate holding steady at 4.1%. Strong inflation and payrolls readings would likely put further upward pressure on yields, bolstering bets of additional Fed hikes, while signs of weakness in the labor market or cooling price pressures could offer yields some relief.
