Hormuz Progress Eases Inflation Fears, US Yields Fall
US Treasury yields declined on Tuesday as positive developments in the Middle East eased inflation fears. Oil prices dropped over 3% after the US Treasury imposed sanctions on 60 entities linked to Iran on Monday. However, reports suggested that the Pakistan Army Chief Munir conveyed a US offer to Iran to halt the blockade in the Strait of Hormuz in exchange for opening the Strait and stopping proxy attacks.
The White House announced the removal of mines in the Strait of Hormuz, which was confirmed by two US officials. The jobs market remains solid, with the ADP Employment Change 4-week average improving sharply. US Building Permits in July showed an improvement, while US households grew less confident regarding financial and economic conditions.
Market participants are now awaiting the release of the Federal Reserve's preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, on Wednesday. The US 2-year T-note yield tumbled nearly five basis points at 4.193%, while the US 10-year benchmark note dropped six basis points at 4.635%.