The apparent catalyst for the recent rebound in U.S. Treasury bonds is the potential easing of the Middle East situation. However, the deeper trading logic involves the market disentangling the "energy supply shock" into two separate chains: one pointing toward inflation and the other toward growth. As the importance of the latter increases, front-end rates begin to fall, and the yield curve shifts to a bullish steepening.
Industrial Chain Transmission
The Strait of Hormuz is a critical node for global oil transportation. When the risk of passage increases, the first to be re-evaluated are the costs of crude oil, shipping, insurance, and refining. The second wave of impact will spread to transport fuels, industrial inputs, and end-consumer prices. Previously, the market was concerned that if energy prices remained persistently high, the Federal Reserve might need to respond to potential secondary inflation with tighter financial conditions. However, the market performance you provided indicates this logic is being revised: interest rate futures are shifting from betting on rate hikes to slight easing, suggesting investors increasingly believe that high oil prices are more likely to suppress demand, erode consumer purchasing power, and drag down corporate profit margins, rather than automatically triggering sustained policy tightening.
Changes in the Bond Market Structure
On Tuesday, the two-year yield fell faster than the 10-year and 30-year yields, meaning the policy-sensitive end first reflected the return of the "growth slowdown trade." Intraday, the two-year/10-year yield spread widened to 53.6 basis points, and closed at 51 basis points, slightly narrowing from Monday's close of 51.8 basis points, but the bullish steepening feature was clear during the day. It is important to note that the intraday rebound did not change the downward pressure on the monthly chart: in March, the two-year yield cumulatively rose 42 basis points, the 10-year rose 35 basis points, and the 30-year rose 26 basis points, indicating that over the past month, bond prices have generally remained in a post-selloff repair stage, rather than confirming a trend reversal.
Macroeconomic Demand-Side Signals
JOLTS data shows that as of the end of February, job vacancies were reduced by 358,000 to 6,882,000, and the vacancy rate decreased from 4.4% to 4.2%. The significance of such indicators is not the data point itself, but rather its resonance with the downward direction of front-end rates: when labor demand marginally slows, the market is more willing to believe that the Federal Reserve will tolerate supply-side price disturbances and focus on preventing demand from weakening excessively. If the risk premium on oil prices continues to decline, the bond market may further trade on the scenario of "slowing growth but not recession"; however, if geopolitical conflicts drive up energy costs again, mid-term pricing may return to a tug-of-war between "which is more dominant, inflation or growth."
