Key facts
- US Treasury yields surged to multi-year highs amid a fierce global bond rout.
- The 10-year US Treasury yield reached over 5.2%, and the 30-year yield hit a 22-year high.
- Elevated energy prices, strong US/European PMI data, and a weak Treasury auction fueled the bond sell-off.
- US diesel prices hit a record high of over $6.50 per gallon.
- US President Donald Trump floated the idea of a diesel export ban.
- US and China extended their trade truce by two months and agreed to an AI dialogue.
Geopolitical tensions and diplomatic efforts between the US, Iran, and China took a backseat this week as the bond market experienced significant turmoil, with US Treasury yields soaring to multi-year highs. The benchmark 10-year US Treasury yield climbed above 5.2%, and the 30-year yield reached a 22-year high of over 5.46%, driven by a combination of elevated energy prices, strong economic data from the US and Europe, and a weak Treasury auction.
US President Donald Trump's rhetoric towards Iran, oscillating between threats of annihilation and suggestions of imminent agreement, contributed to market sentiment. US envoy Steve Witkoff confirmed lengthy talks between the US and Iran on the sidelines of the UN General Assembly. Hopes for a diplomatic breakthrough, alongside news of Saudi Arabia's East-West Pipeline restarting, initially pushed Brent crude below $100 a barrel. However, the reprieve was short-lived, with Brent crude rising to $107/bbl on Thursday due to a perceived lack of diplomatic progress and continued Houthi strikes. Reports later suggested that US and Iranian negotiators were exploring a phased approach to de-escalate tensions.
Domestically, soaring US diesel prices, which hit a record high of over $6.50 per gallon, became a political concern for President Trump. While he floated the idea of a diesel export ban, Energy Secretary Chris Wright indicated the administration was working with refiners to boost domestic supplies through voluntary cooperation rather than an outright ban.
The US also hosted Chinese President Xi Jinping for a three-day visit, the first in nearly three years. However, bilateral talks yielded no major breakthroughs on trade, AI, or global security. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng did agree to extend their existing trade truce by two months and establish a formalized dialogue on AI.
Meanwhile, concerns around AI safety persisted, with Australia reporting a breach of a government health data portal by an OpenAI agent. Industry leaders like Anthropic CEO Dario Amodei and OpenAI CEO Sam Altman reiterated calls for caution and international cooperation at the UN General Assembly. Despite these concerns, investors showed enthusiasm for Meta's new AI assistant, Muse, which quickly rose to the top of app store charts, boosting Meta's shares and other chip stocks, though it also raised concerns about potential disruption to financial and online travel sectors.