Treasury yields rise ahead of CPI as FTSE slips 0.2%

Treasury yields rose ahead of the US consumer price index report due later this week, as market participants positioned for what Wall Street expects to be stable, consensus-aligned inflation figures.

"The US rally was supported by weaker-than-anticipated US jobs numbers which helped dial down fears about an imminent rate hike from the Federal Reserve," said Russ Mould, investment director at AJ Bell. "The Iran conflict remains a key source of concern for markets with a lasting resolution seeming a distant prospect at this point."

The move reverses last week's slide, when weaker-than-anticipated US jobs numbers pushed yields lower. The yield move rippled across global markets Monday. The FTSE 100 slipped 0.2 percent, or 25 points, to 10,875, while France's CAC dipped 0.1 percent and Germany's Dax rose 0.35 percent. Brent crude climbed more than $1 to $84.59 a barrel, a 1.2 percent rise, as Iran insisted the US must meet several demands — including compensation and an end to sanctions — before the Strait of Hormuz can reopen. Gold found support from lower Treasury yields and ongoing Middle East tensions, with investors seeking assets that have historically held value in uncertain times.

The CPI print carries outsized significance for the Fed's next move. If inflation comes in at or below consensus, it could reinforce the case for the Fed to hold rates steady. If it surprises to the upside, markets could quickly reprice rate expectations.

CPI Preview: Consensus Aligned, Stakes High

The eurozone Sentix investor confidence index rose to 0.9 in August from -31.1 in July, the highest since February, suggesting the shock from the Iran conflict has been partially absorbed, although high energy costs and subdued order books remain a drag. The survey of 1,097 investors was conducted between 6 and 8 August.

Across the Atlantic, the UK jobs market showed signs of improvement in July, with starting salary inflation reaching its highest level in six months and temporary vacancies rising for the first time in two years, according to a KPMG and Recruitment and Employment Federation survey. "Rays of light are beginning to break through for the job market as employers revive hiring plans," said Maxine Bligh, REC's chief membership and innovation officer.

Rob Wood, chief economist at Pantheon Macroeconomics, cautioned that rising employment and wage gains suggest the Bank of England's monetary policy committee needs to be cautious. "Wage growth accelerated to the strongest since January, and the permanent salaries index lies above the 52.3 average seen in 2025, suggesting there has been no slowdown in pay growth over the past 18 months."

Hormuz Tensions Keep Oil Elevated

The Treasury yield move comes as oil prices rose almost 2 percent earlier in the session, with Brent crude reaching as high as $85.38 a barrel before settling around $84.99. West Texas Intermediate climbed as high as $79.98, up 1.7 percent at $79.50. Both benchmarks fell more than 7 percent last week on hopes that Iran and Oman were close to a deal to reopen the Strait of Hormuz, through which a fifth of the world's oil and liquefied natural gas supplies passed before the US and Israel attacked Tehran on 28 February.

Iran said it was closing in on a deal with Oman to define new shipping lanes through the Strait of Hormuz but insists the US must meet certain conditions before the waterway is reopened. Iran and the US are not in direct talks, and Tehran will not start them while Washington breaches an interim deal signed in June, Iran's foreign minister Abbas Araqchi said on Sunday.

The CPI release later this week will determine whether the recent decline in Treasury yields extends or reverses. Markets are pricing a Fed that is unlikely to hike rates in the near term, but a hot inflation print could force a reassessment across global asset classes.

This article is for informational purposes only and does not constitute investment advice.