The US 30-year Treasury yield fell to 4.85% on Wednesday, its lowest level since April 15, after President Donald Trump signaled easing tensions with Iran over Strait of Hormuz shipping.
Bond prices rose as the update pushed oil lower, easing near-term inflation fears and lifting demand for long-dated government debt.
Oil Slump Drove the 30-Year Treasury Yield Lower
In a Truth Social post, Trump said Iran confirmed no tolls or charges on ships crossing the Strait of Hormuz. He warned that negotiations would end at once if the claim proved false.
The signal eased fears over the waterway that carries about a fifth of the world’s oil. Falling oil prices followed soon after.
West Texas Intermediate (WTI) almost below $70 a barrel for the first time since March 2. Brent crude briefly fell toward $74, its lowest since before the conflict began in late February.
Lower energy costs ease a key driver of near-term inflation. That prospect drew buyers into Treasuries, pushing prices up and yields down.
The drop reversed much of a sharp spring selloff. The 30-year yield had topped 5.19% on May 19, its highest since 2007, when war fears drove inflation bets higher.
Hawkish Fed Clouds the Outlook
The rally sits awkwardly against the Federal Reserve’s latest message. New Chair Kevin Warsh held rates at 3.5% to 3.75% on June 17, yet projections turned more hawkish.
The median official now sees the rate ending 2026 at 3.8%, above the current range. That points to a hike, not a cut, as the base case. These hawkish Fed signals track inflation the Fed projects at 3.6% for 2026.
The split shows in the curve. The policy-sensitive 2-year yield holds above 4.2%, near a multi-month high, even as the long end leads the decline.
Lower long-term yields still feed into borrowing costs. The 30-year fixed mortgage rate eased to 6.47% in mid-June, down from 6.81% a year earlier, Freddie Mac data shows.
The relief may prove fragile. Economist Nouriel Roubini, who flagged the 2008 housing crash, has warned that long-dated bonds stay exposed if inflation climbs again.
“With six percent inflation and two real, the 10-year bond yield has to be eight percent. Today it’s at four. It goes from four to eight, the price of the bond is going to fall by 40%…” Roubini told BeInCrypto.
Investors now turn to Thursday’s inflation report, the Fed’s preferred gauge and the next key inflation data point.
Until then, competing market risks from the Fed and the Middle East will keep yields volatile. For now, cheaper oil has handed the long end of the curve a reprieve.
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