Treasuries fell sharply after reports of escalating Middle East conflict pushed oil prices higher, lifting yields across maturities. The two-year note climbed to 4.83%, the highest in a week, while West Texas Intermediate crude surged to $98.50 per barrel. The selloff followed a Reuters report suggesting the US was preparing embassy staff evacuations in the Persian Gulf, later clarified as limited to Saudi Arabia.
Analysts warn renewed Iran tensions could reignite inflation pressures, forcing central banks to maintain hawkish stances. US government bond yields remain near multiyear highs amid expectations of strong economic performance and additional Fed rate hikes. Traders assign a 20% probability to another rate increase at the October 28 meeting.
Meanwhile, a 20-year Treasury auction drew the highest yield since sales resumed in 2020. Stock markets initially dipped on the news but recovered, while recent declines in AI infrastructure stocks have raised questions about capital spending profitability. Despite oil approaching February highs, investors continue shifting toward bonds on fears of economic slowdown.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing