According to the Wisetrade Financial APP, the price of the 10-year US Treasury bond, which has the largest trading volume in the US bond market, achieved the biggest increase in two weeks. The sharp drop in international oil prices has significantly alleviated investors' concerns about rising US inflation and the worry of high inflation preventing the Federal Reserve from continuing to cut interest rates. The latest data shows that due to cooling expectations of rate cuts and rising inflation prospects, the yield of the 10-year US Treasury bond, known as the 'anchor of global asset pricing,' significantly fell from a two-and-a-half-month high, dropping by as much as 6 basis points to 4.06%, indicating an increase in bond prices.

At the same time, the yields of German and British bonds with the same tenor decreased by 6 basis points. Influenced by positive consumer price data, the yield of Canadian bonds with the same term also dropped significantly.

On Tuesday, the North American crude oil pricing benchmark - WTI crude oil futures prices plummeted by over 5% to below $70 per barrel, while the international crude oil pricing benchmark - Brent crude oil prices fell nearly 5% on Tuesday and are currently hovering around $73.

Earlier reports suggested that the Israeli military may refrain from targeting Iran's crude oil infrastructure as part of retaliatory measures against a series of missiles launched earlier this month. More importantly, the International Energy Agency (IEA) stated on Tuesday that the global oil market is expected to face a significant 'oversupply' situation on a large scale globally in the new year, specifically in 2025.

Previously on Monday, the Organization of the Petroleum Exporting Countries (OPEC) had lowered global oil demand growth forecasts for this year and next for three consecutive months. With OPEC repeatedly revising down overall oil demand expectations including crude oil and various petroleum products obtained after processing crude oil, OPEC appears to be abandoning its long-standing extremely optimistic forecasts for oil demand.

The pessimistic reports on oil demand by the authoritative institutions in these two major energy sectors undoubtedly devastated the trend of crude oil prices, thereby lowering market expectations for inflation in the usa. After all, energy prices have been driving the steady rise of the usa CPI since 2022. A recent U.S. non-farm employment report earlier this month showed strong wage growth and a significant increase in non-farm employment numbers beyond expectations. Additionally, with the U.S. Consumer Price Index (CPI) slightly higher than expected, investors' concerns about inflation in the usa have also heightened.

The overall CPI in September announced by the United States on October 10th only rose by 2.4% year-on-year, the lowest since 2021, but higher than the economists' general expectation of 2.3%. In Canada, the latest inflation data released on Tuesday showed a decrease in the year-on-year CPI growth rate to 1.6% in September, a decline beyond economists' expectations, the lowest since February 2021.

With the escalation of the situation in the Middle East, investors are becoming increasingly worried about the re-intensification of price pressures and the uncertain policy prospects of the next U.S. president regarding inflation. Measures to expand welfare by both sides may push up inflation expectations. Therefore, the downward trend in oil prices undoubtedly significantly alleviated investors' concerns about inflation in the usa.

Christopher Rieger, Director of Interest Rate and Credit Research at Commerzbank AG in Germany, stated: "Today, traders seem to simply connect their trading machines with crude oil futures. Whether it makes sense to adjust their long-term inflation views in this context is another question."

In recent weeks, as Wall Street traders continue to track conflicts in the Middle East, crude oil prices have shown a "roller coaster trend." The Middle East region accounts for about one-third of global crude oil and refined oil supply. However, in the past few trading days, due to the ongoing negative concern of 'oversupply', the latest report released by OPEC on Monday reinforced traders' expectations of an imminent oversupply in the oil market, causing Brent crude oil prices to remain weak recently. On Tuesday, the IEA's prediction of an imminent oversupply of oil further hit Brent crude oil futures prices.

According to a survey of 29 economists from October 7th to 10th, regardless of whether Donald Trump or Kamala Harris wins the presidency, the median inflation rate in the usa for the next four years is expected to be higher than the long-term inflation rate targeted by the Federal Reserve—namely the 2% inflation goal.

Editor/ping