* Treasury yields retreat as oil prices fall from four-year high
* Fed meeting signals more hawkish stance; rate-cut expectations reduced
* Mixed US economic data seen supporting Fed’s cautious approach (Updated in New York afternoon time)
NEW YORK, April 30 (Reuters) – U.S. Treasury yields eased on Thursday as oil prices pulled back from a four-year high and traders continued to digest a Federal Reserve meeting that struck a more hawkish tone than many had anticipated. Global oil prices fell after hitting a four-year high above $126 a barrel earlier on Thursday, amid concerns the U.S.-Israeli war with Iran could lead to a protracted Middle East supply disruption and hurt global economic growth. The move higher was fueled in part by an Axios report that U.S. Central Command was set to brief President Trump on plans for possible further military action against Iran. Iran said on Thursday it would respond with “long and painful strikes” on U.S. positions if Washington renewed attacks.
Two- and 10-year Treasury yields have reached their highest levels in more than a month while 30-year yields topped 5% – the highest level since July – as investors grow increasingly concerned that elevated oil prices will stoke inflation and keep the Fed on hold for longer.
“The greatest contribution (to the move higher in yields) is just the uncertainty as to what impact this is going to have on the U.S. economy,” said Michael Lorizio, head of U.S. rates and mortgage trading at Manulife Investment Management.
Lorizio said he still sees value in Treasuries under two scenarios: “Either there’s a de-escalation that leads towards a reduction in the price of oil and some stabilization there, which I think would be supportive of duration. Or if this extends longer than expectations and that has some demand destruction, that also would be supportive of Treasuries.”
Yields retreated from their session highs as oil prices fell back and investors weighed whether two- and 10-year yields were poised to break out of their recent trading range. Two-year yields reached as high as 4.027% on March 27, while the 10-year touched 4.484% on the same date.
The 2-year note yield, which typically moves in step with Fed interest rate expectations, was last down 4.9 basis points at 3.883%. The yield on benchmark U.S. 10-year notes fell 2.8 basis points to 4.388%.
The yield curve between two- and 10-year notes steepened by around 2 basis points to 50 basis points.
FED’S MORE HAWKISH SIGNAL
Yields briefly pared the decline after U.S. economic data showed first-quarter gross domestic product grew at a 2% seasonally adjusted annualized pace, up from 0.5% in the fourth quarter of 2025, though it fell short of economist estimates for a 2.3% gain. Separately, the Personal Consumption Expenditures Price Index – the Fed’s preferred measure of inflation – rose 0.7% in March, the largest gain since June 2022, putting the annual inflation rate at 3.5%, in line with forecasts. “The U.S. data this morning was mixed but probably validates the Fed’s stance yesterday of a little bit of a hawkish turn or a hawkish leaning compared to the previous meeting,” Lorizio said. The Fed left itsbenchmark overnight interest rate unchanged on Wednesday, as expected, but the decision was not unanimous, with three members dissenting over language suggesting the central bank could eventually resume rate cuts. This divide was seen as a more hawkish signal, with traders now pricing in a chance of a rate hike in the first half of 2027.
Fed Chair Jerome Powell said at a post-meeting press conference that the U.S. central bank could drop its easing bias as soon as its next meeting. Powell also said he intends to remain as a Fed governor for now to defend the central bank’s independence amid pressure from the Trump administration. Kevin Warsh, U.S. President Donald Trump’s pick to lead the Fed, cleared a key procedural hurdle on Wednesday, opening a path for him to succeed Powell next month. (Reporting by Karen Brettell; Additional reporting by Amanda Cooper; Editing by Paul Simao and Edmund Klamann)
