Treasuries Gain Amid Oil Decline and UK Bond Rally

US Treasuries rallied on Thursday as oil prices declined and UK government bond yields fell, boosting confidence in the Federal Reserve's ability to combat inflation.

The two- and five-year Treasury yields retreated from multiyear highs reached earlier this week after the Fed's interest-rate hike, while the 10-year yield dropped eight basis points to 4.95%, snapping an eight-day rising streak.

Analysts say the Fed's credibility in fighting inflation was restored by Chairman Kevin Warsh's rhetoric on inflation, which drove up market-implied expectations for at least one more rate increase this year and as many as two more in 2027.

The rally in UK government bonds, sparked by the Bank of England's decision to scrap plans to sell long-dated gilts, also contributed to the improvement in sentiment. The UK 30-year yield declined as much as 13 basis points to 5.73%.