Bond Yields Soar Amid Escalating US-Iran Tensions

Bond yields reached their highest levels in almost two decades as tensions between the US and Iran escalated. The yield on the US 30-year Treasury bond rose by up to 1.6 basis points to an intraday high of 5.326%, while its 10-year counterpart traded up 1.8 basis points at 4.7399%. Charu Chanana, chief investment strategist at Saxo Bank in Singapore, said this move could raise the hurdle rate for stocks and tighten financial conditions.

The rise in bond yields was accompanied by a decline in stocks across Asia, with MSCI's broadest index of Asia-Pacific shares outside Japan sliding 0.8%. The South Korean KOSPI lost 2.1%, while the Nikkei 225 fell 2.2%.

Oil prices continued their rally for a third consecutive day, with Brent crude futures edging up 0.4% to $91.26 a barrel. Masahiko Loo, senior fixed income strategist at State Street Investment Management in Tokyo, attributed the bond market pressure to a 'buyers' strike' rather than a sellers' panic.

Analysts questioned why the rise in bond yields had not led to a climbdown on the Iran war from the US president. ING analysts noted that typically, moves above 4.65% for the US 10-year have been followed by soothing words from the Trump administration, but this time there was no indication of an imminent resolution.