Global Bond Rout: U.S. Treasury Yields Reach 4-Year High on Iran Tensions

Global government bond markets have been experiencing a selloff, with U.S. 10-year Treasury yields reaching their highest level in nearly three years at 4.8122%. This rise is attributed to rising oil prices and renewed U.S.-Iran tensions, which are intensifying inflation concerns.

The move has spread across major sovereign markets, with Japan's 10-year government bond yield surpassing 3% for the first time since 1996 and Australia's 10-year yield reaching 5.198%, its highest in 15 years.

Federal Reserve Chairman Kevin Warsh noted that the Fed's preferred PCE inflation measure was running at 3.7% over 12 months, above the central bank's 2% target, while six-month PCE inflation was 4.1%. He also stated that 54% of the 199 components in the PCE basket had increased more than 3% over the previous year, while 49% had annualized increases above 3% over six months.

The increase in yields has not eliminated the underlying strength of the U.S. economy, with Warsh saying that equipment and intangible investment had increased at an annual four-quarter rate of about 9%, with more than half of this year's capital-expenditure growth potentially linked to AI infrastructure.