US Treasury bonds witnessed their largest rise in two weeks, with the decline in oil prices, which eased concerns about high inflation, according to what Bloomberg reported.
US 10-year Treasury bond yields fell from their highest level in two and a half months, falling by more than 5 basis points to reach 4.05%. Yields also reached their lowest levels during the session, coinciding with a sharp decline in Canadian bond yields after the release of consumer price index data that fell below expectations. Most European markets saw a similar decline in yields.
The agency said that oil prices fell by more than 5% to reach less than $70 a barrel on Tuesday, after a report stated that Israel may avoid targeting Iranian oil infrastructure as part of its response to the missile attacks it was subjected to earlier this month.
Investors’ fears have increased about the acceleration of price pressures with the escalation of tensions in the Middle East and the possibility that inflationary policies will affect the economy, especially with the approaching US presidential elections.
“Traders seem to be tying their trades to oil futures these days, but the question remains whether it makes sense to adjust longer-term inflation expectations based on this,” Christoph Rieger, head of credit and interest rate research at Commerzbank, told Bloomberg.
The Middle East fuels volatility
The recent oil price fluctuations come in light of increasing tensions in the Middle East, which contributes about a third of global supplies. But concerns about inflation in the US have also risen after the jobs report released earlier this month showed strong wage growth, along with a higher-than-expected CPI reading.
In Canada, the consumer price index for last September witnessed a larger than expected decline in the annual rate, reaching 1.6%, its lowest level since February 2021, according to Bloomberg.
In the United States, the consumer price index for September rose by 2.4% on an annual basis, which is also the lowest since 2021, but it was slightly higher than economists’ expectations of 2.3%.
