Bond Yield Surge Reverses on Iran Peace Deal, Then Spikes on Hawkish Fed
Key Questions
What caused the initial drop in 10-year Treasury yields to near 4.0%?
The yields fell due to the Iran peace deal triggering an oil price crash, leading to a dovish market repricing.
Why did yields surge back above 4.2% after the initial drop?
Yields reversed higher following Warsh's hawkish FOMC meeting, where the dot plot showed 9 officials expecting a rate hike and the easing bias was removed.
How might the yield surge impact mortgage rates and corporate bonds?
Weekly mortgage rates may rise again, while corporate bond spreads remain tight but face increasing pressure from higher yields.
10-year Treasury yield dropped to near 4.0% on Iran peace deal oil crash, but after Warsh's hawkish FOMC (dot plot shows 9 officials see a hike, removal of easing bias), yields surged back above 4.2%. Markets now price in two rate hikes. The earlier dovish repricing has been reversed. Weekly mortgage rates may rise again. Corporate bond spreads remain tight but under pressure. Hot PCE data (4.1% headline) on June 18 has further supported yields. Yields edging higher, confirming the hawkish repricing.