(Bloomberg) -- Treasuries head for their best win streak in a month, buoyed by a sharp retreat in oil prices on optimism that talks between the US and Iran will lead to the resumption of tanker traffic around the Arabian Peninsula.
US 10-year yields fell for a third day, down three basis points to 4.62%, reducing their premium over two-year peers — which are among the most sensitive to monetary-policy — to the lowest in almost four weeks.
"The move suggests investors remain reluctant to fully remove the risk premium associated with renewed inflation pressures and the possibility that central banks may yet need to keep policy restrictive for longer," said Evelyne Gomez-Liechti, a multi-asset strategist at Mizuho International Plc.
Swaps tied to policy-meeting dates assign a greater than one-in-three chance that the Federal Reserve will raise interest rates by a quarter-point on Wednesday.
"That's very unusual," Laura Cooper, head of macro credit at Nuveen Administration Ltd, told Bloomberg TV. "If you look at the past decade or so, the Fed has well telegraphed what their moves could be, so investors are having to grapple with this new Warsh regime of no Fed guidance."
She's said the Fed is likely to "pause for now" but is still "leaning against the need for a hike this year."
Citadel Securities Sees Warsh Delivering Surprise Fed Rate Hike
US ADP jobs numbers due later may offer clarity on the employment outlook. There is no forecast in the four weeks to July 11, after previously rising 16,500. The Conference Board's consumer confidence figures are expected to show an improvement to 92.4 in July from 91.2 in June. The Treasury will offer $44 billion of new seven-year notes.
Brent crude prices were 2.3% lower at $86.28 a barrel, having reached a two-month peak above $100 last week.
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