Odaily Planet Daily report: As oil prices declined, reinforcing optimistic sentiment around inflation prospects, bond traders have largely stopped pricing in a Fed rate hike this year. The rebound in the U.S. Treasury market pushed yields down by as much as 9 basis points across maturities, with the 30-year yield falling 8 basis points ahead of Thursday’s new issuance of this tenor. The offering is expected to set the highest yield for a 30-year Treasury since 2001. Benchmark oil prices dropped more than 3% on Thursday; since the supply shock triggered by U.S. strikes on Iran in late February, oil prices have been a primary driver of U.S. Treasury yields, as traders interpret signals from the ongoing conflict.
The decline in oil prices has reinforced optimism that U.S. inflation has peaked. Government data released on Thursday showed a slowdown in July's producer prices, following a consumer price report from the previous day that marked the second consecutive month of easing inflation. Rising short-term interest rate contracts have pushed interest rates lower, indicating that traders are reducing their bets on further Federal Reserve rate hikes. (Jin10)