US 10-Year Yields May Hit 3.75% on Oil Slide, Yardeni Says

Core Insights - Falling oil prices may lead benchmark Treasury yields to levels not seen in over a year, potentially hitting 3.75% if the Federal Reserve lowers interest rates [1][2] - A significant drop in US West Texas Intermediate crude prices, attributed to a growing oil glut and fears of a global economic slowdown, is expected to reduce headline consumer inflation rates and enhance consumer purchasing power [3][4] - The current bond rally is occurring alongside a stock market rise, indicating a rare market alignment where traders anticipate a slowing economy that can control inflation without entering a recession [4][5] Oil Market Dynamics - Crude oil futures have decreased from $80 per barrel in January to below $58, contributing to a decline in 10-year Treasury yields [4] - The reduction in energy costs from falling oil prices is likely to further cool inflation, supporting the case for additional Federal Reserve interest rate cuts [5] Treasury Market Implications - The bond market is experiencing a rally driven by expectations of interest rate cuts and concerns surrounding regional banks in the US, with the 10-year yield recently recorded at 3.97%, marking an 18 basis points decline this month [3][4]