Bond Selloff Continues as Oil Prices Surge on Strait of Hormuz Tensions
A bond selloff resumed on Monday as oil prices rose after President Donald Trump rejected Iran's latest proposal to reopen the Strait of Hormuz, intensifying inflation concerns.
The yield on US two-year bonds increased by five basis points to 4.90%, while the 10-year yield climbed four basis points to 5.20%. Sovereign bonds also fell in Japan, Australia, and South Korea.
Brent oil gained almost 2% to $106.31 a barrel as of 10:59 a.m. in Hong Kong after Iran said it wouldn't soften its conditions to reopen the Strait of Hormuz, renewing pressure on the Federal Reserve to hike interest rates to rein in inflation.
The ongoing hawkish Fed messaging and oil above $100 are pivotal to the bearish impetus, according to Damien McColough, head of fixed income research at Westpac Banking Corp.