Treasury yields steady as Trump strikes diplomatic tone on Iran ahead of midterms

• Energy prices fell following Trump's diplomatic comments, with WTI crude down 0.79% to $90.77 per barrel and Brent crude falling 0.99% to $103.25
• The Treasury Department sold $22 billion in 30-year notes with strong demand, as indirect bidders (including central banks) took over 72% of the auction, above the 10-auction average of 68%
• Fed Governor Christopher Waller suggested more rate hikes may be needed to combat inflation that has stayed above the Fed's 2% target for more than five years, though not necessarily immediately

Summary: Treasury Yields Steady Amid Iran Diplomacy and Fed Comments

Market Overview:

Treasury yields remained largely flat Friday morning as investors processed geopolitical developments and recent auction results. The 10-year Treasury yield held steady at 5.24%, while the 30-year yield was unchanged at 5.615%. Shorter-term 2-year yields rose slightly by 2 basis points to 4.78%, reflecting expectations around Federal Reserve policy.

Geopolitical Developments:

President Trump announced the U.S. would not launch strikes against Iran before next month's midterm elections, adopting a more diplomatic stance. This follows Treasury yields hitting their highest levels since 2002 earlier in the week. The conciliatory tone eased energy markets, with WTI crude falling 0.79% to $90.77 per barrel and Brent crude declining 0.99% to $103.25.

Federal Reserve Policy:

Fed Governor Christopher Waller indicated additional interest rate hikes may be necessary to combat persistent inflation, which has exceeded the Fed's 2% target for over five years. However, he suggested rate increases may not be immediately required, providing some flexibility in the policy outlook.

Treasury Auctions:

The Treasury Department completed its latest debt issuance, selling $22 billion in 30-year notes Thursday. Notably, indirect bidders—including central banks—purchased over 72% of the offering, above the 10-auction average of 68%, signaling strong international demand. This followed Wednesday's $39 billion sale of 10-year notes.

Market Implications:

The combination of diplomatic de-escalation, strong auction demand, and measured Fed rhetoric has stabilized bond markets after recent volatility. Energy price declines may ease inflation pressures, though sticky inflation remains a concern for policymakers.