The yield on the 10-year US Treasury note fell to below 4.55% from the two-month high of 4.62% on July 13th, as softer inflation data pushed back expectations of a Federal Reserve rate hike.
Both consumer and producer prices were below expectations in June, suggesting that the pullback in wholesale fuel costs were transmitted to the economy at a greater magnitude than forecast. Fixed-income assets were also supported by new geopolitical uncertainty after US President Trump claimed China compromised US presidential elections in 2020, risking the truce between both countries since the exchange of tariff hikes last year.
Still, pro-inflationary risks lingered as strikes between the US and Iran were extended and commercial vessels refrained from crossing the Strait of Hormuz at the elevated traffic volumes from June.
Rate futures suggested that over two thirds of the market are positioned for a Fed hike by the end of the year, although this month's decision is expected to be a hold.