Treasury yields tick lower after DOJ drops Fed probe, paving the path for Senate to vote on Warsh

U.S. Treasury yields ticked lower Friday after the Justice Department abandoned a criminal investigation into Federal Reserve Chair Jerome Powell, paving the way for the Senate to vote on nominee Kevin Warsh as his replacement to head the central bank.

The yield on the 10-year U.S. Treasury note — the benchmark for mortgages, credit card debt and auto loans — was down almost 2 basis point to 4.304%.

The 2-year Treasury note yield, which more closely tracks short-term Federal Reserve interest rate policy, dropped nearly 4 basis points to 3.809%. The longer-dated 30-year Treasury bond yield fell more than 1 basis point to 4.906%. 

Yields have moved higher the past week as crude oil prices have climbed. Last Friday, the 10-year Treasury note yielded 4.244% and the 2-year stood at 3.70%. A barrel of West Texas Intermediate crude oil is higher by about 13% so far this week.

One basis point equals 0.01%, and yields and prices move in opposite directions.

The Department of Justice move Friday to drop a criminal investigation into Federal Reserve Chair Jerome Powell removed a major hurdle to the Senate confirming Kevin Warsh, President Donald Trump's nominee to replace him.

Jeanine Pirro, the top federal prosecutor in the District of Columbia, announced the decision to abandon the Powell probe in a post on X. The probe had been crippled by a federal judge's ruling quashing subpoenas her office issued to the Federal Reserve related to a multi-billion-dollar renovation of its headquarters in Washington.

Sen. Thom Tillis, a North Carolina Republican, had put an effective hold on the Senate even voting on whether to confirm Warsh unless the criminal investigation of Powell was dropped.

Also on Friday, consumer sentiment held at record-low levels in April even as a ceasefire took hold in the Middle East, according to the latest University of Michigan survey.

The school's Survey of Consumers showed the sentiment gauge at 49.8, slightly above the initial April reading of 47.6 and better than the Dow Jones consensus estimate for 48.6. But the reading marked a 6.6% decline from a month ago and a 4.6% decrease from the same time a year ago, and is the lowest on record.

"After the two-week [Mideast] cease-fire was announced and gas prices softened a touch, sentiment recovered a modest portion of its early-month losses," said survey director Joanne Hsu.

Inflation expectations in the near term remain elevated, with consumers seeing prices up 4.7% a year from now.

Treasury yields have moved higher over the past week as U.S. oil prices have risen 13% amid tensions in the Strait of Hormuz between the U.S. and Iran, which both seized ships this week. Inflation risks linked to the war have led traders to expect the Federal Reserve to leave its key interest rate unchanged this year, per the CME FedWatch Tool.

— With additional reporting CNBC reporters Dan Mangan and Jeff Cox.