Yields Ease and Rate-Hike Odds Fade as Hormuz Deal Nears

The yield on the 10-year Treasury note slipped to around 4.6% this week, extending its retreat from an 18-month high of 4.75% as reports pointed to an imminent interim agreement between the US and Iran to reopen the Strait of Hormuz. Treasury Secretary Scott Bessent said a deal could be reached within days.

Falling oil prices tied to the diplomatic progress have eased inflation concerns, and markets trimmed the odds of a September Federal Reserve rate hike to around 57%, down from 67% a day earlier. The Fed held its benchmark rate at 3.5% to 3.75% in late July in a 9-3 vote.

Lower yields and cheaper energy are a supportive backdrop for rate-sensitive holdings, including REITs, telecoms, and dividend payers, while airlines stand to benefit directly from any sustained decline in fuel costs.