Iran Conflict Sends Bond Yields Soaring to Three-Year High

The resumption of fighting between the US and Iran has sent shockwaves through global markets, pushing bond yields to new highs. The yield on the US 10-year Treasury bond reached an intraday high of 4.8122%, its highest level in almost three years.

The conflict, which saw the Pentagon complete a wave of strikes against Islamic Revolutionary Guard Corps targets and Tehran striking back at US assets in Jordan and Iraq, has added to already mounting fiscal concerns. Bond investors are demanding higher compensation to fund governments running large deficits, and a renewed oil shock is undermining the appeal of fixed-income assets.

Rising yields in Japan could also keep more Japanese money at home, reducing a powerful source of overseas bond demand that has long helped anchor global debt markets. Bank of Japan officials have vowed to continue raising rates, with Governor Kazuo Ueda calling for a continued pace of interest rate hikes.