Oriental Jincheng said in a research note that renewed geopolitical
tensions—US–Iran escalation and Iran’s Monday announcement it closed the Strait
of Hormuz—should lift oil prices, revive inflation and raise rate expectations,
making this the primary driver of higher 10-year U.S. Treasury yields. Fed Chair
KEVIN WARSH is due to testify at Congress’s semiannual monetary policy hearing
this week; the firm expects his remarks to skew hawkish and signal a stronger
focus on inflation control, which would push up real rates. Partially offsetting
factors include an overall June decline in oil and an expected drop in June U.S.
CPI versus May, which should limit the magnitude of the yield rise. Net: with
geopolitical shock plus hawkish central-bank guidance, the central tendency of
the 10-year UST yield is most likely to move higher.
