Bonds took another hit to start the week. After a jump to multiyear highs across maturities last week on tough talk from Federal Reserve officials, Treasury yields pushed higher again Monday alongside a pop in oil. The weakness was not confined to the US, with sovereign bonds also under pressure in Japan and Australia.
Crude pushed higher, with Brent up 1.4% to $105.80 a barrel during early Asian hours, as Iran said it would not ease the conditions it has set for reopening the Strait of Hormuz. That firmed up inflation concerns and added to the case for more Fed tightening. Axios reported that Trump expects talks to pick back up this week even though he turned down Iran's latest offer.
Damien McColough, head of Westpac Banking Corp.'s fixed-income research, said, "The ongoing hawkish Fed messaging and oil above $100 are pivotal to the bearish impetus." Meanwhile, Treasury Secretary Scott Bessent urged Fed officials to keep an "open mind" on the path for rates, saying productivity improvements tied to artificial intelligence and deregulation could help keep US inflation in check.
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Rising yields and triple-digit oil make the inflation fight tougher, which can weigh on bond prices and keep rate expectations elevated. If you are watching macro signposts, traders have their eyes on two-year and 10-year yields around 4.90% and 5.20%, plus Brent holding above $100, as cues for how bumpy the next stretch might be.
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