(Bloomberg) — Treasuries rose after another Federal Reserve official hinted that an interest-rate cut could come as soon as next month, extending gains stoked by haven demand after the US bombed nuclear sites in Iran over the weekend.

US government debt wiped out its early losses on Monday after Fed Governor Michelle Bowman said she could support a rate cut in July if inflation remains subdued, echoing comments by Christopher Waller on Friday. That pushed yields lower across maturities, with the benchmark 10-year rate down six basis points to 4.31%, the lowest level in just over a week.

Traders, meantime, boosted their bets that the Fed will lower rates by at least 50 basis points before the end of the year, with a roughly 20% probability of a reduction in July. Markets are pricing in a September move as more likely.

Earlier in the session, Treasuries had fallen alongside other global bonds as the escalating conflict in the Middle East stoked fears of an oil-supply disruption that would fan inflation. Oil, though, has since slipped as fears faded that the conflict with Iran would immediately disrupt supplies from the Middle East. That’s helped European government debt to since follow Treasuries higher. 

“For now, it seems like Treasuries are more worried about the negative growth impact via uncertainty, than the inflationary impact of higher crude prices,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management.

Yields on two-year Treasuries, most sensitive to the Fed’s monetary policy, are lower by eight basis points to 3.82%. The dollar also reversed, wiping out early gains to trade little changed. 

Those moves came as Bowman said in a speech at a conference in Prague that she would support lowering rates at the next meeting as long as “inflation pressures remain contained.” Confirmed this month to serve as the central bank’s vice chair for supervision, she also said the “time has come” to revisit the current approach to leverage ratio requirements amid concerns the rule has constrained lenders’ trading in the $29 trillion Treasuries market.

On Friday, Waller said the central bank could cut next month, reiterating his view that any inflation hit from tariffs is likely to be short-lived. Bloomberg Economics puts Bowman among the Fed officials who are considered neither a dove nor a hawk, while Waller is classified as the most dovish policymaker.

Bowman’s echo of Waller on the possibility of a July move “is definitely more dovish than the market expected from her,” said Molly Brooks McGown, US rates strategist TD Securities. “We think July is unlikely. If there is an increase in the odds of a July cut, we think it would be driven by more of a deteriorating growth story rather than inflation.”

The Fed at its meeting last week held its benchmark interest rate in a range of 4.25% to 4.5%. Following the meeting, Fed Chair Jerome Powell reiterated his view that policymakers can afford to take a patient approach on rate adjustments, as they wait for additional details on how Trump’s economic policies, particularly on trade, evolve. 

–With assistance from Alice Atkins and Alex Nicholson.

(Adds comment, updates yield levels)

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