- Treasuries are largely ignoring Venezuela headlines because they have not changed the inflation outlook.
- Friday’s U.S. jobs report, including payrolls and the unemployment rate, is the key near-term catalyst for yields.
- Brent crude’s sharp 2025 decline on oversupply and weak demand is easing energy-driven inflation pressure.
- With the 10-year around 4.14–4.18%, the next move in yields and Fed-cut expectations hinges on incoming data.
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Recent developments in Venezuela—including U.S. intervention and speculation over oil production revival—have created headlines but thus far have had limited impact on U.S. Treasury yields. Portfolio managers quoted in MarketWatch argue that Venezuela’s oil supply changes are too uncertain and isolated to shift inflation trajectories meaningfully. Domestic U.S. economic indicators, especially labor market data, are playing a much larger role in shaping bond markets.
Economists expect U.S. nonfarm payroll gains for December to be modest—with some forecasts around 73,000 jobs added and unemployment rate easing slightly to 4.5% from 4.6% [Primary source]. These numbers, if realized, would support a view of continued labor market cooling rather than overheating, likely reinforcing a cautious Fed rather than one pushing aggressively for rate hikes.
Meanwhile, global oil markets are undergoing a marked weakening. Brent crude fell nearly 18% during 2025 in response to oversupply—driven by high production from both OPEC+ and non-OPEC producers—and weaker demand growth, particularly from China. The decline in energy costs is a tailwind for inflation disinflation, helping to offset potential inflationary spillovers from geopolitical unrest. Without oil prices rising sharply, the Venezuelan developments are unlikely to force upward moves in headline inflation sufficient to alter Fed rate plans or longer-term yields.,
Treasury yields have stabilized: the 10-year is hovering around 4.14–4.18%, with the 30-year near 4.77%,. These levels already reflect significant prior adjustments for inflation risk, rate expectations, and supply-demand dynamics. With Fed policy likely entering a waiting phase, upcoming data—especially Friday’s jobs report—pose potential catalysts for the next move, whether in yield curves or credit spreads. Open questions include whether labor data will surprise to the upside, whether oil supply disruptions from Venezuela/Iran will materialize in practice, and how persistent the demand slowdown remains globally. These will shape both tactical and strategic positioning in fixed income and energy sectors.
Supporting Notes
- MarketWatch quoted portfolio manager Vincent Ahn stating that Venezuela “is not moving the bond market because it is not moving the inflation story.”
- Primary source projections expect ~73,000 new nonfarm jobs in December and unemployment rate falling to ~4.5%.
- 10-year Treasury yield recently tracked near 4.14–4.18%.,
- Brent crude finished 2025 near $60.85/barrel, down almost 18% year-over-year due to oversupply and weak demand.
- Frbsf research indicates long-term inflation expectations have remained well-anchored despite oil supply shocks, though interest rates show higher sensitivity to unexpected oil supply surprises.
- Kashkari of the Fed has warned that unemployment might “pop” higher, highlighting risk in labor market weakness.