Increase in Treasury Purchases Amid Plummeting Oil Prices and Eased Fed Rate Hike Expectations

U.S. Treasury prices have risen. As the possibility of a diplomatic resolution to the Iran conflict increases, international oil prices have plummeted, raising expectations that the Federal Reserve (Fed) will lower its aggressive rate hike prospects. According to Bloomberg on the 4th, U.S. Treasury yields fell by 4 to 6 basis points, with the 2-year Treasury yield dropping to its lowest level, while the 10-year Treasury yield recorded 4.62%. West Texas Intermediate (WTI) crude futures prices fell by about 6%, marking the lowest level since the 13th of last month. U.S. Treasury Secretary Scott Vessen and Qatari officials mentioned the possibility of an agreement between the U.S. and Iran, contributing to the continued decline in oil prices. The drop in oil prices has also eased expectations for further tightening by the Fed. The short-term interest rate futures market reflects about a 15 basis point rate hike possibility at the September FOMC meeting. The market views the employment report for July, set to be released on the 7th, as a key variable in determining the Fed's policy direction. The U.S. Treasury maintains its outlook for increased Treasury issuance, and there is also attention on the potential signal for an expanded bidding size in the quarterly Treasury issuance plan to be announced on the 5th.