10-year Treasury yield falls below 4.5% as oil falls to pre-war levels

U.S. Treasury yields fell on Wednesday as Brent crude prices fell to levels not seen since before the Iran war began as concerns over heightened inflation eased.

The yield on the 10-year U.S. Treasury note, the key benchmark for U.S. government borrowing, declined more than 8 basis points to 4.41%.

The 2-year Treasury note yield, which more closely tracks short-term Federal Reserve interest rate policy, shed 5 basis points to 4.15%. The longer-dated 30-year Treasury bond yield moved more than 8 basis points lower to 4.858%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

International benchmark Brent crude futures for August fell 4% to around $73 per barrel and reached its lowest level since before the start of the U.S. and Israeli-led war against Iran at the end of February.

U.S. West Texas Intermediate futures for August were last seen 4% lower at roughly $70 per barrel. U.S. crude had earlier hit its lowest level since early March.

Investors were also encouraged by signs that maritime traffic through the Strait of Hormuz could begin returning to normal.

More than 11,000 seafarers stranded in the Persian Gulf will begin exiting through the Strait of Hormuz after safety guarantees were secured, according to the International Maritime Organization.

“We have secured the necessary safety guarantees and have thoroughly verified the conditions for safe navigation to support these operations,” IMO Secretary-General Arsenio Dominguez said in a statement.

President Donald Trump also said in a Truth Social post Wednesday that Iran has informed the U.S. that there would not be tolls, insurance costs or charges of any kind placed on ships traversing the strait.

A key test comes later this week, when May’s reading on the personal consumption expenditures price index, the Fed’s preferred inflation gauge, is released Thursday. 

Excluding volatile food and energy prices, core PCE is expected to increase from April, according to economists polled by FactSet.

— CNBC’s Sam Meredith also contributed to this report.