Key facts
- The benchmark 10-year US Treasury yield rose to 5.26%, its highest level since 2002.
- The 30-year US Treasury yield surged 7 basis points to 5.57%.
- The 2-year Treasury yield rose 7 basis points to 4.94%.
- Brent crude rose 3% to approximately $107 a barrel.
- West Texas Intermediate crude rose 3% to approximately $95 a barrel.
- US stocks declined, with the S&P 500 down 0.77%.
The sell-off in US Treasurys intensified on Monday, pushing the benchmark 10-year yield to its highest level since 2002, as investors grappled with rising oil prices and geopolitical tensions between the US and Iran. The 10-year yield climbed 8 basis points to 5.26%.
Investors' worries about inflation appeared to be amplified by President Donald Trump's rejection of Iran's proposal for a ceasefire and to reopen the Strait of Hormuz. The potential closure of the Strait has been a significant concern for investors throughout the year, contributing to anxiety in the oil market. A Wall Street Journal report also indicated that Trump expects the US to continue attacking Iran after the midterm elections.
Inflation data, particularly the core Personal Consumption Expenditures (PCE) report—the Federal Reserve's preferred inflation gauge—due Wednesday, is a key focus for investors this week. Brent crude, the international benchmark, rose 3% to around $107 a barrel, while West Texas Intermediate crude also increased by 3% to approximately $95 a barrel.
Seema Shah, chief global strategist at Principal Asset Management, noted in a statement that markets have adjusted their policy outlook, pricing in further Federal Reserve rate hikes for 2026 and additional tightening in 2027, especially if oil prices persist above $100 per barrel. This outlook contributed to a drop in US stocks, with the S&P 500 declining 0.77%, the Dow Jones Industrial Average down 0.70%, and the Nasdaq 100 down 1.19% shortly after 12:00 pm ET.
Paul Hickey, co-founder of Bespoke Investment Group, identified energy prices and bond yields as the primary drivers of the stock market's decline. The tech sector, which had rallied the previous week on optimism surrounding AI agents and Meta's Muse launch, saw notable declines, with Intel, Samsung, SK Hynix, Meta, Advanced Micro Devices, Oracle, and Microsoft all experiencing drops.
Economists like Mohamed El-Erian suggested that elevated yields are likely to persist in the near term due to an imbalance between long-term demand and supply for bonds. Shah added that strong US economic growth expectations could also contribute to further increases in yields.