- The U.S. and Iran agreed to an interim peace deal, with President Donald Trump and Pakistani negotiators saying a signing would occur Friday and the Strait of Hormuz would reopen the same day.
- Brent crude oil fell 4.3% to $83.53 per barrel on the news, easing a key driver of inflation expectations in major economies.
- The 10-year German government bond yield fell 4 basis points to 2.960%, and the 10-year French yield dropped 5.7 basis points to 3.587%, according to Tradeweb data.
- Jefferies economist Mohit Kumar said in a note that the European Central Bank is likely done with its rate hiking cycle and that oil below $80 would remove any reason for the Federal Reserve to raise rates.
- The 10-year U.S. Treasury yield slipped nearly 5 basis points to 4.45%, according to FRED data, after reaching a one-month low of 4.420% overnight.
Yields on eurozone government bonds fell Monday as investors lowered their expectations for further European Central Bank interest rate increases after the United States and Iran reached an interim peace deal that sent oil prices sharply lower.
The 10-year German government bond yield fell 4 basis points to last trade at 2.960%, according to Tradeweb data. Ten-year French government bond yields dropped 5.7 basis points to 3.587%.
The moves followed the announcement that President Donald Trump and Pakistani negotiators said a deal would be signed on Friday. Trump said the Strait of Hormuz would be reopened the same day. The waterway, through which about a fifth of global oil supply transits, had been a flashpoint in the conflict.
Brent crude dropped 4.3% to $83.53 per barrel on the news, easing a key driver of inflation that had been pushing central banks toward tighter policy.
The ECB is likely done with its rate hiking cycle, Jefferies’ Mohit Kumar said in a note. If oil falls below $80 in the near term, it would remove any reason for the Federal Reserve to raise interest rates, Kumar added.
The 10-year U.S. Treasury yield slipped nearly 5 basis points to 4.45%, according to FRED data, after reaching a one-month low of 4.420% overnight, Tradeweb data showed. The DXY dollar index fell 0.3% to 99.496 after reaching a 10-day low of 99.384 earlier.
The bond market rally marks a sharp reversal from recent weeks. MSI previously reported that global government bond yields rose on uncertainty over U.S.-Iran talks as recently as June 1, when oil prices and yields surged on renewed clashes. The interim deal has rapidly shifted the outlook for both inflation and monetary policy across major economies.