On Tuesday, Treasury yields fell significantly as the bond market reopened after Memorial Day, with the 10-year U.S. Treasury note yield dropping to 4.510% and the 2-year yield to 4.066%. This decline aligns with a broader trend seen in European sovereign yields, suggesting a market response to geopolitical tensions and hopes for a peace deal in the Middle East.
The U.S. military conducted strikes in Iran, which were described as self-defense, while Secretary of State Marco Rubio indicated that the Strait of Hormuz would need to be opened. Despite these tensions, President Trump suggested that negotiations for a peace agreement were progressing positively.
Investors are also preparing for upcoming economic data, particularly the April personal consumption expenditures (PCE) Price Index, which Bank of America predicts will show a 0.4% increase from March and a 3.8% year-on-year rise. This economic data will be crucial for assessing inflation and could impact Federal Reserve policy moving forward