Treasury Yields Fall After Biggest Back-up Over Two Days Since February

On Friday morning, yields on U.S. government bonds experienced a widespread decline due to investor shifts toward safe-haven assets, driven by concerns over potential escalation of tensions in the Middle East.

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The yield on the 2-year Treasury note, known as BX:TMUBMUSD02Y, decreased by 6.8 basis points to 4.891%, down from 4.959% recorded on Thursday.

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Similarly, the yield on the 10-year Treasury note, BX:TMUBMUSD10Y, fell by 7.9 basis points to 4.496%, compared to 4.575% the previous day. Additionally, the yield on the 30-year Treasury note, BX:TMUBMUSD30Y, dropped by 6.6 basis points to 4.595%, down from 4.661% on Thursday.

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The primary factor influencing market movements is the evolving situation in the Middle East. Reports suggest that Israel is preparing for a potential direct attack from Iran, possibly occurring as early as Friday or Saturday, as per The Wall Street Journal. However, there's uncertainty surrounding this information, with a person briefed by Iranian leadership indicating that no final decision has been made.

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In domestic developments, data released on Friday revealed a decline in consumer sentiment for April, dropping to 77.9 from 79.4 in March, according to preliminary figures from the University of Michigan.

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This dip signals growing frustration regarding inflation among consumers. Additionally, the import price index rose by 0.3% in March for the third consecutive month, mainly due to increased oil prices, contributing to upward pressure on inflation in the United States.

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The recent surge in yields for the 10-year and 30-year Treasury notes, experiencing increases of 21 basis points and 16.2 basis points respectively on Wednesday and Thursday, marked their most significant two-day gains since periods ending on February 5th and April 2nd.

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This surge was triggered by a higher-than-anticipated U.S. consumer price index for March, which raised doubts about the Federal Reserve's ability to execute three interest rate cuts within the year.

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