Easing geopolitical friction across the Middle East provided relief to fixed-income assets, as US Treasury yields moved downward in tandem with declining crude prices. A potential deal is likely to center on an agreement between Iran and Oman to navigate a temporary shipping route through the Strait of Hormuz. The 10-year US Treasury yield fell 9 basis points to 4.64%, and WTI crude fell 9% to $77 per barrel. While lower yields suggest energy-driven inflation pressures may begin to cool, stabilizing oil market fundamentals will take time, delaying price relief for consumers at the pump.

Bond investors closely watched the first coordinated US–Japan currency intervention in nearly three decades to support the yen. Over recent years, wide policy differentials between aggressive Federal Reserve rate hikes and Bank of Japan monetary easing drove the yen to 40-year lows, resulting in massive capital outflows into higher-yielding US assets. The intervention was conducted through foreign currency as the US sold Euros and Japan sold US dollars, both to purchase the Japanese Yen. The intervention drew particular attention because Japan is the largest foreign holder of US Treasuries. Had they intervened independently, investors feared Japan could have been forced to sell its Treasury holding to fund yen purchases, pushing bond prices lower and moving mid to long term yields higher. Direct US support mitigated the risk of a disorderly government bond selloff and broader market volatility.

Last week, mixed North American labor market data and strong U.S. manufacturing activity spurred movement in yields. US payrolls unexpectedly lost 23,000 jobs in July (missing a projected 80,000 gain), while the unemployment rate dipped to 4.1%. Consequently, short-term yields fell as markets reduced September Fed rate hike odds from 60% to 40%. Conversely, Canada added 75,100 net jobs, lowering its unemployment rate to 6.4%—the lowest level since July of 2024. The strong jobs number pushed yields in Canada slightly higher.

Tech issuers and AI infrastructure led corporate credit news. Alphabet Inc. raised US $25 billion through a 10-part bond sale, maturities ranging from two to 40 years. According to Bloomberg, generous yield payouts—with the premium for the longest maturity bond being 1.3% above US Treasuries—pulled in approximately $115 billion in demand, placing it third among the year's top investment-grade bond transactions (behind Oracle’s $129 billion in February and Amazon’s $126 billion in March).