Treasury Yields Fall on Softer Data and Strait of Hormuz Attack Report

U.S. Treasury yields fell on Thursday as investors weighed a softer-than-feared inflation report, mixed U.S. economic data and renewed geopolitical risk in the Strait of Hormuz.

The 10-year Treasury yield slipped to about 4.39%, while the 2-year yield fell to about 4.12%, according to market coverage cited by the Wall Street Journal. The move added to a bond rally that had already been supported by the morning's economic releases.

U.S. data set the backdrop

The May personal consumption expenditures report showed inflation rising 0.4% from the prior month and 4.1% from a year earlier. Core PCE increased 0.3% month over month and 3.4% year over year.

The figures did not deliver a fresh upside surprise for rates markets. Instead, they reinforced the view that inflation remains above the Federal Reserve's target without accelerating sharply in the latest reading.

WSJ also cited weaker parts of the data calendar, including a 4.5% drop in durable goods orders and weekly jobless claims of 215,000. Together, those releases pointed to a slower-growth backdrop even as price pressures remained persistent.

That combination mattered for Treasurys because softer growth tends to support bonds, while sticky inflation can limit how far yields fall. The day’s trading reflected both forces at once.

Strait of Hormuz risk returns

The bond move also came after reports that a Singapore-flagged cargo ship was struck in the Strait of Hormuz near Oman. AP reported that the vessel was hit by a projectile, sustained damage and did not report injuries or environmental harm.

The International Maritime Organization then paused its effort to evacuate ships through the strait. AP said the pause followed the attack and came amid renewed warnings from Iranian authorities.

AP quoted Iran's Persian Gulf Strait Authority as saying transit outside Iran's designated routes would not be covered by a safe-passage guarantee. It also quoted Iran's Revolutionary Guard naval arm calling an alternative route established without coordination with Iran unacceptable and dangerous.

The Strait of Hormuz remains a major energy chokepoint. AP noted that before the conflict, roughly a fifth of global oil and natural gas traffic passed through the passage.

Why markets care

For bond investors, the significance of the incident goes beyond shipping itself. Any disruption in the strait can affect oil prices, and higher energy costs can feed back into inflation expectations.

That is important for mortgage rates, corporate borrowing costs and broader financial conditions. It also complicates the Federal Reserve's job if geopolitical pressure pushes energy prices higher even as other parts of the economy soften.

The immediate question is whether the vessel attack proves to be an isolated event or the start of broader disruption in the waterway. Traders will also be watching whether oil prices and Treasury yields extend the move or reverse after further statements from Iran, the United States or maritime authorities.

Unanswered questions remain about who carried out the attack, the vessel's exact identity and route, and whether the IMO or Oman adjusts the evacuation plan. For now, the trading pattern reflected a familiar market response: Treasurys gained support from softer data while geopolitics added a risk premium to energy and shipping.