Key facts
- Long-dated U.S. Treasury yields, including the 30-year, reached their highest levels in 19 years.
- German, French, and Japanese long-dated yields also hit multi-year highs.
- Brent crude oil prices surged to $91 per barrel due to increased tensions with Iran.
- U.S. President Donald Trump maintained an uncompromising tone regarding Iran.
- Asian stock markets closed lower, and U.S. stock futures were down.
Long-dated government bond yields across the globe, including the U.S. 30-year Treasury, have surged to multi-year highs, driven by escalating geopolitical tensions with Iran and fears that inflation may prove persistent. Brent crude oil prices climbed to $91 per barrel as Iranian officials adopted more aggressive rhetoric.
U.S. President Donald Trump maintained an uncompromising tone regarding Iran, suggesting that potential energy blockages in the Gulf could extend for months. This situation, coupled with concerns that the Federal Reserve might be unable or unwilling to bring inflation back to its target, has pressured long-dated bonds. The moves in yields occurred despite recent soft economic and inflation data that had reduced expectations for further Fed rate hikes.
Equity markets reacted negatively to the rising yields and geopolitical uncertainty, with Asian shares closing lower and U.S. stock futures trading in negative territory. Investors are also awaiting key U.S. economic data, including import and export prices, housing starts, and industrial production, as well as earnings reports from major retailers like Home Depot, Target, and Walmart.
A Reuters/Ipsos poll released Monday indicated a significant drop in President Trump's approval rating, with a large majority of Americans concerned about the duration of U.S. involvement in Iran. The poll also highlighted voter sentiment regarding economic management ahead of the November midterm elections.