U.S. Treasury yields fall as oil prices plunge on Iran de-escalation hopes

• The 10-year Treasury yield fell over 1 basis point to 4.688%, while the 2-year yield dropped 4 basis points to 4.252% and the 30-year yield declined over 4 basis points to 5.226%
• Oil prices plunged following Trump's claims of Iran negotiations, though Iran's foreign ministry denied immediate plans for direct U.S. talks, stating only Oman-mediated discussions on the Strait of Hormuz are occurring
• The 30-year Treasury yield reached its highest level since 2007 last week after a 'hawkish hold' by the Federal Reserve, with some officials favoring rate increases to combat inflation

Summary

Market Movement:

U.S. Treasury yields declined on Monday alongside falling oil prices amid hopes for de-escalation in the Iran conflict. The 10-year Treasury yield fell over 1 basis point to 4.688%, while the 2-year yield dropped 4 basis points to 4.252%. The 30-year yield decreased over 4 basis points to 5.226%.

Geopolitical Developments:

President Donald Trump claimed negotiations with Iran were progressing after the U.S., at the request of Gulf allies, postponed additional strikes against Iran. However, Iranian foreign ministry spokesperson Esmail Baghaei contradicted this narrative, stating no immediate plans exist for direct U.S.-Iran negotiations. Tehran confirmed only ongoing talks with Oman regarding the Strait of Hormuz.

Federal Reserve Context:

The 30-year Treasury yield reached its highest level since 2007 last week following the Federal Reserve's "hawkish hold" decision. Some Fed officials favored raising rates to combat inflation and voted against maintaining the current rate range of 3.5% to 3.75%.

Market Analysis:

Seema Shah, Chief Global Strategist at Principal Asset Management, noted that declining short-dated yields reflect a more dovish near-term policy outlook, while rising long-end yields indicate concerns about Fed Chair Warsh's willingness to act aggressively if inflation persists. Shah characterized this as the bond market "testing the Fed's credibility."

Upcoming Data:

Manufacturing PMI data for July was scheduled for release at 3:00 p.m. ET on Monday, representing the day's key economic indicator.