Iran-U.S. Tensions Spark Bond Yield Surge

Bond vigilantes are pushing yields to new highs as tensions escalate between the U.S. and Iran, sending oil prices soaring and inflation concerns rising.

The resumption of conflict in the Middle East has pushed the yield on the U.S. 10-year Treasury bond to an intraday high of 4.8122%, its highest level in almost three years, while Japan's 10-year government bond yield surged this week to levels not seen in three decades.

Rising yields are a headache for bond investors already grappling with mounting fiscal concerns, and the renewed oil shock is adding fuel to the inflation fire, undermining the appeal of fixed-income assets. The Bank of Japan has vowed to continue raising rates ahead of its September 17-18 meeting, with Governor Kazuo Ueda calling for a faster pace of interest rate hikes.