Treasury yields climb as oil gains deepen inflation concerns

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Treasury yields climb on oil

Highlights

Treasury yields rise Tuesday with the 30-year at 5.322% and the 10-year at 4.736% as oil gains stoke U.S. inflation fears.
Iran's refusal to extend the 60-day U.S. peace deal deadline and threats of an offensive raise geopolitical risk, pressuring bonds and equities.
Long-dated government bond yields in Japan, Germany, the UK, and France approach multi-decade highs amid global inflation concerns.

Geopolitical strain lifts long-term borrowing costs

As reported by CNBC, Treasury yields rise on Tuesday, with longer-dated debt leading the move as investors react to renewed inflation fears tied to Middle East tensions and higher energy prices.

The U.S. 30-year Treasury yield adds more than 1 basis point to trade around 5.322%, staying just below its highest level since 2002. The 10-year Treasury note yield, a key benchmark for mortgages, auto loans and credit card debt, is more than 1 basis point higher at 4.736%, while the 2-year Treasury yield is flat at 4.186%. One basis point equals 0.01%, and bond yields move inversely to prices.

Oil prices rise after the 60-day deadline for the U.S. and Iran to secure a peace deal expires on Monday, with Iran ruling out an extension, according to state media. A senior Iranian official also tells Reuters that Tehran will take an offensive stance if diplomacy with the U.S. fails. Deutsche Bank's Jim Rid writes in a Tuesday note that markets have seen growing weakness over the last 24 hours, with bonds and equities slipping on negative geopolitical headlines from the Middle East and few signs of a deal that would reopen the Strait of Hormuz.

Global bond markets reflect broader inflation anxiety

Renewed inflation worries are pushing government borrowing costs higher beyond the U.S., leaving many longer-maturity bond yields near multi-decade highs across major developed markets.

Japan's long-dated government bond yields hover near levels reached in May, when yields hit 40-year highs. Germany's 30-year bond yield is last seen at its highest since 2011, British long-dated bond yields approach a multi-decade high, and French 30-year government bond yields edge up to a post-2008 high.

Investors are also looking ahead on Tuesday to U.S. import and export price figures for July, along with housing starts and pending home sales, for further signals on inflation and economic momentum.

In our earlier article, we covered the sharp rise in long-dated U.S. Treasury yields as investors reacted to escalating Middle East tensions, higher oil prices, and persistent concerns about growing debt supply. We also noted that the bond selloff was echoing across Japan and Europe, while recent U.S. Treasury auctions cleared at multi-decade high yields—underscoring investor unease about fiscal deficits and heavier issuance.

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