By James Hirai

(Bloomberg) -- Treasuries are on course for their first gains in a week, as a fall in oil prices following the US capture of Venezuela’s president is easing concerns about persistent inflation.

The yield on US 10-year debt fell two basis points to 4.17%, while the more monetary-policy sensitive two-year rate dropped one basis point to 3.46%. Money markets have baked in the Federal Reserve delivering two quarter-point reductions to borrowing costs this year, with around a 25% chance of a third cut.

Most Read from Bloomberg

• Sinkholes and Quake-Hit Roads Expose Japan’s Infrastructure Emergency

Most bonds around the world gained after crude futures prices fell on Monday amid fears over a global supply glut. Any revival in Venezuela’s oil output would follow tumbling production over the past two decades, and the market is facing a big surplus this year as OPEC+ and others add more barrels.

While heightened geopolitical concerns often spur a demand for havens such as Treasuries, US stock futures are higher on Monday driven by gains in the technology sector. US cash bonds are also lagging their swap counterparts, which signals increased risk appetite.

“Geopolitical shocks historically don’t tend to have much of a lasting impact,” Deutsche Bank AG strategists including Henry Allen wrote in a client note. “That might seem surprising, but that’s because markets generally trade on macro variables like growth and inflation, rather than geopolitical shocks per se.”

Traders will next be looking at US ISM manufacturing numbers for December due later Monday for the latest clues on the health of the economy, ahead of Friday’s key jobs report.

Most Read from Bloomberg Businessweek

• Erasing the Verdict: The Ongoing Shock of Trump’s Cocaine Kingpin Pardon

• Ozempic Users Actually Spend More Dining Out. Smart Restaurants Are Adapting

• What to Expect from the US Economy in 2026

• Japan’s Viral Horse-Racing Video Game Has Players Flocking to Real-Life Stables