U.S. Treasurys retreated further on Friday after falling sharply the previous session, while global bond yields and oil prices also plunged, as traders monitor the growing prospect of a resolution to the Middle East war.
The 10-year Treasury note yield — the main benchmark for mortgages, auto loans and credit card debt — was down more than 2 basis points, at 4.4434%.
The yield on the 2-year Treasury note, which typically moves in line with short-term Federal Reserve interest rate decisions, fell more than 2 basis points to 4.0473%. The 30-year Treasury yield, which tends to track geopolitical events, dropped 1 basis point to 4.9414%.
One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.
On Friday, Iran’s state-run Mehr News Agency reported details of the draft 14-point memorandum of understanding between the U.S. and Iran. The proposed deal includes a reopening of the Strait of Hormuz “with Iranian agreements”, the lifting of oil sanctions and an end to all hostilities in the region, including Lebanon.
That followed comments from President Donald Trump on Thursday that Washington had made a “settlement”, subject to a “finalization of documents.”
Borrowing costs fell sharply on Thursday, with 10-year Treasury yields down as much as 8 basis points, with yields on the 2-year and 30-year also firmly lower, after Trump called off plans for fresh strikes against Iran.
The prospect of a peace deal also pulled energy prices sharply lower and sent global bond yields tumbling.
U.S. crude oil futures fell 4.5% to $83.79, while Brent crude, the international price benchmark, dipped 4.3% to $86.47.
Yields on 10-year U.K. government bonds — also known as Gilts, the key barometer for British government borrowing — were more than 8 basis points lower, at 4.823%. The yield on 10-year German bund, seen as an indicator of euro zone debt, slipped more than 5 basis points to 2.9686%.
The reversal in U.S. Treasury yields comes as investors digested a higher-than-expected rise in May’s producer price index, a key indicator of wholesale inflation.
The index was up a seasonally-adjusted 1.1% for the month, pushing the annual rate to 6.5%, as per the Bureau of Labor Statistics data reading. Economists polled by Dow Jones had expected a monthly print of 0.7%.