Treasury yields retreat, 10-year hovers around January 2025 highs

• The 10-year Treasury yield fell 1 basis point to 4.693% after hitting 4.7% the previous day, while the 2-year yield dropped nearly 2 basis points to 4.333%
• Weekly jobless claims came in at 187,000, significantly below the expected 212,000, indicating continued labor market strength
• Geopolitical risk remains elevated as Trump stated he is 'close to making a decision' on launching strikes against Iran bigger than anything seen in the conflict so far

Treasury Yields Retreat from January 2025 Highs Amid Geopolitical Tensions

Key Market Movements:

U.S. Treasury yields pulled back on Friday after briefly touching their highest levels since January 15, 2025. The benchmark 10-year Treasury note yield declined 1 basis point to 4.693%, after surpassing 4.7% on Thursday. The 2-year note yield, which tracks Federal Reserve policy expectations, dropped nearly 2 basis points to 4.333%, while the 30-year bond yield remained flat at 5.169%.

Inflation Concerns:

Thursday's spike was triggered by Brent crude oil climbing above $100 per barrel, reigniting inflationary fears. The 10-year yield is particularly significant as it serves as the key benchmark for mortgage rates, auto loans, and credit card debt.

Geopolitical Risk:

President Trump announced he is "close to making a decision" on launching a "massive attack" on Iran, describing it as potentially the largest strike of the ongoing conflict. U.S. forces have conducted 13 consecutive nights of strikes on Iranian targets, with the Middle East conflict extending to the Red Sea. Trump stated Iran has not "received enough pain yet."

Economic Data:

Weekly jobless claims for the week ending July 18 came in at 187,000, significantly below the 212,000 consensus forecast from Dow Jones economists, suggesting continued labor market strength.

Market Outlook:

Investors are awaiting the S&P Global Flash U.S. Purchasing Managers Index report, which will provide insights into the health of manufacturing and services sectors, offering further direction for Treasury markets amid elevated geopolitical tensions and inflation concerns.