After the U.S. and Iran traded retaliatory attacks around the Strait of Hormuz over the past few days, investors drove yields up as oil jumped and inflation concerns reemerged. Brent crude was up roughly 2.2% to $92.38 a barrel, while West Texas Intermediate futures climbed 2.61% to $88.05.
In the U.S., the 10-year Treasury yield rose 3 basis points to 4.7880%, a 20-month high. A snapshot later showed the U.S. 10-Year at 4.77% with a +0.012 move at 12:02 PM EDT.
Japan saw a bigger move at the long end, with its 10-year yield hitting the 3% threshold for the first time since 1996. A market read showed the Japan 10 Year at 3.01% with a +0.015 change at 12:59 AM JST. The 2-year yield touched 1.81%, marking a 31-year high.
Germany and France moved in tandem. The 10-year bund yield rose more than 3 basis points to 3.3546%, a new 52-week high, and the 2-year bund climbed to 2.9496%, the most since July 2024. France's 2-year yield reached its highest level since April 2024.
The U.K. posted some of the day's sharpest moves. The 10-year Gilt added over 9 basis points to 5.2341%, the highest since June 2008. A later quote showed the British 10-Year Gilt at 5.2271% with a +0.0023 change at 4:02 PM GMT. The 30-year Gilt increased by 9 basis points to 5.8856%, a level last seen in March 1998.
Part of the pop reflects catching up with global markets following a public holiday on Monday. It also coincided with reports that Prime Minister Andy Burnham is set to tell lawmakers the country can lift growth only through greater public control.
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Treasury Secretary Scott Bessent played down concern about higher U.S. yields during a CNBC interview on Monday. Speaking from Asheville, North Carolina, where the G20 finance ministers were meeting, he said the U.S. bond market remains "the best performing market" globally, noting that Fitch reaffirmed its AA+ rating on U.S. government debt last month.
Steve Englander, head of Standard Chartered's global G10 FX research and its North America macro strategy, offered a cooler take on CNBC's "Squawk Box Europe" on Tuesday. He said the six-month conflict, plus a Supreme Court tariffs ruling that, as he put it, wiped out about 40% of the extra tariff take, has added pressure to bonds. Englander said yields across the curve are likely to stay biased higher and noted the U.S. is not alone in dealing with deficits. "I think 'best performing', as Bessent said, isn't the same as well performing," he said. "Everybody has a deficit problem - I don't think there's any reason to cheer."
Higher yields mean pricier borrowing and a market refocus on inflation as energy costs climb. For anyone holding bonds, it changes both the income on new issues and the price you might get for older ones. It also resets the vibe between cash, stocks, and bonds. The levels worth watching from Tuesday's move were clear - the U.S. 10-year at 4.7880%, Japan's 10-year at 3%, and the U.K. 10-year at 5.2341%.