By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel is divided on the sustainability of the recent bond rally, with some attributing it to geopolitical relief and others to softening inflation data. The key debate centers around the stickiness of core PCE inflation and the potential for oil prices to reaccelerate headline inflation, which could force the Fed to maintain higher rates longer.
Risk: A reacceleration in oil prices and energy-related inflation, which could force the Fed to maintain higher rates longer and cap bond upside.
Opportunity: A sustained deceleration in monthly core PCE inflation, which could give the Fed room to cut rates despite the elevated annual rate.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
(RTTNews) - After coming under pressure early in the session, treasuries showed a significant turnaround over the course of the trading day on Thursday.
Bond prices climbed well off their early lows and into positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 2.6 basis points to 4.455 percent after reaching a high of 4.510 percent.
Treasuries initially moved to the downside amid a spike by the price of crude oil, with U.S. crude oil futures surging as much as 4.3 percent.
The price of crude oil jumped after reports the U.S. launched another round of "self-defense strikes" in southern Iran, leading Tehran to retaliate by purportedly targeting a U.S. air base.
However, bond prices rebounded after a report from Axios said U.S. and Iranian negotiators have reached an agreement on a 60-day memorandum of understanding.
Citing two U.S. officials and a regional source involved in the mediation efforts, Axios indicated the MOU would extend the ceasefire and launch negotiations on Iran's nuclear program.
Axios noted President Donald Trump has not yet given final approval, with a U.S. official saying he wants a couple of days to think about the deal.
In U.S. economic news, the Commerce Department released a report showing consumer prices in the U.S. increased by slightly less than expected in the month of April.
The Commerce Department said its personal consumption expenditures (PCE) price index rose by 0.4 percent in April after climbing by 0.7 percent in March. Economists had expected prices to increase by 0.5 percent.
The report also said the annual rate of growth by the PCE price index accelerated to 3.8 percent in April from 3.5 percent in March, in line with estimates.
Excluding food and energy prices, the core PCE price index crept up by 0.2 percent in April after rising by 0.3 percent in March. Core prices were expected to rise by another 0.3 percent.
The annual rate of growth by the core PCE price index ticked up to 3.3 percent in April from 3.2 percent, matching expectations.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"The bond rally prices in a durable de-escalation that remains unapproved and reversible within days."
Treasuries' rebound rests on an unapproved 60-day Iran MOU and April PCE coming in 0.1pp below expectations, pushing the 10-year yield to 4.455%. Yet the initial 4.3% oil spike from actual U.S. strikes and Iranian retaliation highlights how quickly risk-off flows can reverse. Annual headline PCE at 3.8% and core at 3.3% remain above target, while Trump’s two-day review window leaves the ceasefire fragile. Markets appear to price in rapid de-escalation without confirming follow-through or oil supply stability. The move looks more like short-covering than a durable shift in duration demand.
If Trump signs the MOU and Iran curbs enrichment, the risk premium in oil collapses and real yields could fall further, extending the rally beyond what the soft April print alone justifies.
"Treasuries rallied on geopolitical relief, not inflation resolution—core PCE remains elevated at 3.3% YoY, leaving the Fed's rate path uncertain and vulnerable to the next data print or Trump's Iran decision."
The headline misleads. Yes, 10Y yields fell 2.6bps to 4.455%, but that's noise—the real story is the geopolitical volatility whipsaw and what it reveals about inflation persistence. PCE monthly came in soft (0.4% vs 0.5% expected), yet the annual core rate accelerated to 3.3% YoY. That's not disinflation; it's sticky. The Iran MOU is priced as risk-off, but it's contingent on Trump approval—a binary event with execution risk. Treasuries rallied on geopolitical de-escalation, not Fed-friendly inflation data. The market is trading headlines, not fundamentals.
If the Iran deal holds and crude rolls over, energy-driven inflation pressures ease materially, potentially validating the Fed's 'patient' stance and justifying lower yields. The monthly PCE deceleration (0.4% vs 0.7%) could signal momentum shifting toward target.
"The cooling core PCE print provides a more sustainable floor for Treasuries than the highly volatile and reversible geopolitical ceasefire."
The market's knee-jerk reaction to the Iran headline highlights a fragile 'geopolitical risk premium' currently baked into Treasuries. While the 10-year yield dropping to 4.455% suggests relief over the MOU, the underlying PCE data is more critical. A 0.2% core PCE print is a positive deviation from the 0.3% expectation, providing the Fed with necessary breathing room. However, the market is over-interpreting a 60-day memorandum as a long-term stabilization. If President Trump rejects the deal or if crude oil prices remain elevated despite diplomatic posturing, the inflation narrative will quickly shift from 'disinflationary' to 'supply-shock driven,' forcing yields back toward the 4.6% handle.
The rally might be a bull trap; if the PCE data is viewed as 'too little, too late' to counter the structural fiscal deficit, the bond market will continue to demand a higher term premium regardless of short-term diplomatic ceasefires.
"The near-term rally in Treasuries is fragile and likely to reverse unless durable disinflation and a credible geopolitical de-escalation materialize."
Today’s price action looks like a data- and rumor-driven pullback for bonds, not a durable shift. Treasuries reversed from early losses as oil spiked on Iran tensions, then trimmed losses on Axios chatter of a 60-day MOU. April PCE inflation cooled modestly (0.4% m/m, core 0.2%), echoing a slower inflation path that should help the case for lower yields. Yet the setup remains fragile: the MOU is not a guaranteed policy outcome, Trump’s approval is uncertain, and a renewed oil shock or a geopolitics flare could push yields higher again. The market is betting on a soft landing, but hedges remain prudent.
The Iran-MOU relief is a fragile signal; if talks stall or oil spikes persist, bonds could reverse, pushing the 10-year back toward 4.6%–4.7% and erasing today’s gains. Additionally, core inflation remains sticky and the Fed could stay on a higher-for-longer path, which would cap any sustained rally.
"Sticky annual inflation and oil risks limit any Treasury rally despite soft monthly PCE."
ChatGPT overlooks the stickiness in annual core PCE at 3.3% YoY despite the soft monthly print. With oil supply risks lingering beyond the unapproved 60-day MOU, energy prices may reaccelerate headline inflation, forcing the Fed to maintain higher rates longer. This setup caps bond upside and risks a reversal toward 4.6% yields if diplomatic follow-through falters.
"Monthly PCE deceleration matters more than annual stickiness for Fed optionality, and services—not energy—is the real inflation battleground."
Grok flags annual core PCE stickiness correctly, but misses the monthly deceleration's signal: 0.2% core m/m is the lowest since late 2023. If this trend persists through May-June, the Fed has room to cut despite the 3.3% annual rate—which is a lagging metric. The real tell isn't today's yield move; it's whether monthly momentum sustains. Oil reacceleration is a legitimate tail risk, but energy's contribution to core PCE is modest (~10%). The binding constraint isn't oil; it's services inflation.
"Structural fiscal deficits and record Treasury issuance will force a higher term premium, regardless of short-term monthly inflation deceleration."
Claude, you are ignoring the fiscal transmission mechanism. While services inflation is the Fed's primary headache, the structural deficit remains the elephant in the room. A 60-day MOU does nothing to address the record Treasury issuance required to fund this deficit. Even if monthly PCE trends lower, the term premium will continue to bloat as long as the supply-demand imbalance in the bond market persists. We are trading the headline, not the fiscal reality.
"Near-term Treasuries will respond more to inflation momentum and policy path than to fiscal headlines; deficits may matter long term, but term premium can compress if PCE cools and the Fed stays patient."
Gemini raises a valid long‑run risk, but the near-term driver is inflation momentum and policy guidance, not fiscal arithmetic alone. Deficits matter, yet term premium can relax if May–June PCE shows continued cooling and the Fed commits to patience; that would cap yields despite a heavy issuance calendar. The bigger red flag remains sticky services inflation and a hawkish tilt if oil shocks reappear, which could reassert higher yields quickly.
The panel is divided on the sustainability of the recent bond rally, with some attributing it to geopolitical relief and others to softening inflation data. The key debate centers around the stickiness of core PCE inflation and the potential for oil prices to reaccelerate headline inflation, which could force the Fed to maintain higher rates longer.
A sustained deceleration in monthly core PCE inflation, which could give the Fed room to cut rates despite the elevated annual rate.
A reacceleration in oil prices and energy-related inflation, which could force the Fed to maintain higher rates longer and cap bond upside.