Initial jobless claims plunge amid rising geopolitical risk premium, triggering the heaviest selling pressure on U.S. Treasuries this year; yields across the curve test the highest levels since 2025.

智通财经2026/07/23 15:51

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US Treasuries came under pressure overnight, as Houthi attacks on Saudi oil tankers in the Red Sea further escalated US-Iran tensions. Trump warned that Iran must be held responsible for Houthi actions. Brent crude accelerated toward the $100 mark, with ongoing geopolitical risk premiums injected into the market.
The European Central Bank maintained interest rates but struck a hawkish tone. The spill-over effect from European bond selling pressure transmitted to the US Treasury market. Initial jobless claims plummeted to 187,000, far below the lowest institutional forecasts and hitting a 57-year low, with continuing claims also falling more than expected—labor data further reinforced the tightening narrative.
The sell-off occurred on relatively light volumes, mainly driven by CTAs and algorithmic trading. Yields across different maturities broke key technical support levels, testing the highest levels of this year and since 2025. While employment data pose no issue for the Fed's dual mandate, inflation pressures are pushing rate hike expectations even higher.
Federal funds futures pricing shows the probability of a rate hike at next week’s meeting has risen to about 35%, up from just 10% a week ago. The probability for hikes in September and December have climbed to roughly 83% and 93% respectively, with expectations for further tightening fully priced in for the year.
Traders note that short positions were mostly built at higher yield levels, and the current selling pressure is showing signs of easing. With typically subdued summer trading, hedge funds have been consistent net sellers this week but are also buying crude oil futures. Mortgage accounts are conducting gamma hedging and are among the top sellers in the 10-year sector. As yields stabilize, real money funds are tentatively entering the market, and pension funds are buying long-term maturities in both cash and futures markets.

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Initial jobless claims plunge amid rising geopolitical risk premium, triggering the heaviest selling pressure on U.S. Treasuries this year; yields across the curve test the highest levels since 2025.

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