Oil Price Surge Sends Global Bond Yields Soaring

Global bond yields hit new highs on Friday as surging oil prices fueled inflation risks. The price of Brent crude futures soared to a four-month high of $109.97 per barrel, with oil flows restricted through the Strait of Hormuz due to escalating tensions between the US and Iran.

The surge in oil prices sent investors scrambling to price in more policy tightening from central banks across the globe. Bond yields spiked as markets ramped up bets that the US Federal Reserve will raise interest rates this month to tame inflation, currently priced at 68% probability.

Asian bonds fell sharply on Friday, with Australia's three-year government bond yields surging 17 basis points to a 15-year high of 5.037%. Japan's 10-year government bond yields rose 5.5 basis points to 2.965%, while the US benchmark 10-year Treasury yields jumped overnight to close in on the critical 5% level.

Analysts at JPMorgan expect eight out of nine major central banks to hike rates between now and year-end, including the Fed, BoJ, all four European central banks they cover, Australia, and New Zealand. The surge in oil prices has raised the stakes for US consumer prices data due later this week.