Key facts
- The US 30-year Treasury bond yield reached 5.321%, its highest level since June 2007.
- Oil prices extended gains for a third consecutive day, with Brent crude around $91 per barrel.
- A US-Iran ceasefire agreement expired, leading Iran to threaten a "fully offensive" military posture.
- Asian stocks declined, with the MSCI ex-Japan index down 0.7%.
Bond yields climbed to levels not seen in decades as the conflict in the Middle East worsened and investors feared the effect on inflation. The yield on the 30-year Treasury bond hit its highest level since June 2007 on Tuesday, reaching an intraday high of 5.321%. This occurred as a senior Iranian official told Reuters that Tehran would shift to a "fully offensive" military posture because efforts to negotiate a permanent end to the war with the U.S. have stalled, and Washington ruled out extending a temporary ceasefire agreement that expired on Monday.
Oil prices extended their gains for a third consecutive day, with Brent crude around $91 per barrel. The prospect of higher energy prices, alongside signals from the U.S. central bank over the path ahead, spilled over into global fixed income markets. The yield on the benchmark 10-year Treasury bond was up 0.4 basis point at 4.7259%, while corresponding Japanese government bond yields climbed 2.5 basis points to 2.945%, a three-decade high.
Underscoring diplomatic strains, U.S. President Donald Trump threatened to bomb Oman if they "get in the way" of negotiations around the future of the Strait of Hormuz. The Gulf state is the latest American ally to attract his ire this week, following South Korea and Canada. The selloff in global fixed income weighed on equities in the Asian trading session, with MSCI's broadest index of Asia-Pacific shares outside Japan off 0.7%, dragged down by a 1.5% fall in South Korea's KOSPI. The Nikkei 225 slumped 2.1%, while S&P 500 e-mini futures were down 0.3%. In early European trades, pan-region futures were down 0.4%, German DAX futures were 0.5% lower, and FTSE futures were flat.