The US bond-market selloff accelerated on Thursday as spiking oil prices fanned inflation fears and the Treasury Department bought fewer bonds than expected during its first expanded buyback operation. The drop sent two-year yields surging by the most since the market’s April 2025 meltdown, beginning after escalating turmoil in the Middle East drove oil to a four-month high and wholesale price gauges showed building inflation pressures. The move has also been fueled by doubts about the effectiveness of Treasury Secretary Scott Bessent’s unusual intervention aimed at stabilizing the market and curbing the jump in long-term yields. Those questions built on Wednesday when he underwhelmed traders with the size of his amped-up buyback operation, and then again on Thursday when his department followed up by purchasing just $5.19 billion of 10- to 20-year debt — less than the $6 billion maximum he announced. The operation stoked skepticism about the Trump administration’s ability to ease a selloff that’s been building over the last six months. With no end to the Iran war in sight or any plans for taming the government’s deficit, investors say his moves are likely to have only limited impact. "Bessent is bringing a squirt gun to a firefight," said George Catrambone, head of fixed income at DWS Americas. "It’s not enough to quell the premium investors want to receive to buy US 30-year debt, given current debt, deficit and inflation concerns."

The rise in yields was led by shorter-maturity securities that are more sensitive to monetary policy changes by the Federal Reserve, with traders wagering that the central bank may start raising interest rates as soon as next week. Two-year Treasury yields jumped 16 basis points to 4.59%, the biggest one-day rise since the market meltdown unleashed by President Donald Trump’s tariff rollout in April 2025. Ten-year yields climbed 12 basis points to the cusp of their late 2023 peak, while those on 30-year bonds rose 8 basis points to 5.37%, a fresh 19-year high. "Crude oil drives inflation, and if it starts getting into the system it’s going to be hard to contain it," said Tony Farren, managing director in rates sales and trading at Mischler Financial Group. "There’s no reprieve for yields to go lower if inflation remains elevated." Brent oil rose over $107 a barrel as deteriorating conditions in the Middle East stoked concerns over global supplies. Traders have been rattled by an uptick in attacks around the Strait of Hormuz, the critical waterway that’s become the focal point of the conflict, and by the lack of any signs that the US and Iran are moving toward de-escalating the conflict. The rise in energy costs has driven up bond yields worldwide steadily since Trump started the war in February as the president’s early confidence in a swift victory has given way to a protracted stalemate. The swelling supply of new debt has also played a role, as well as a resilient US economy and massive capital investment from artificial intelligence firms. In early Asia trading on Friday, Australian and New Zealand bond yields surged. Australia’s 10-year yield climbed to the highest since 2011, while New Zealand’s equivalent hit 5% for the first time in more than two years.