Oil Price Surge Sparks Global Bond Yield Rally
Global bond yields surged to new highs on Friday as soaring oil prices increased inflation risks. Oil prices jumped 6 percent overnight, reaching a four-month high of $109.97 per barrel for Brent crude futures.
The Strait of Hormuz remains restricted due to fighting between Houthi and Saudi-backed forces in Yemen, which has imperiled maritime traffic through the Bab el-Mandeb. Analysts at RBC Capital Markets predict Brent could reach $121.99 per barrel by the fourth quarter.
The 10-year Treasury yield rose overnight, nearing the critical 5 percent level. The 30-year Treasury yield hit its highest since 2007, while two-year yields surged 12 basis points as markets increased bets on a US Federal Reserve rate hike to combat inflation, now priced at a 68 percent probability.
Asian bonds fell sharply, with Australia's three-year government bond yields rising 17 basis points to a 15-year high of 5.037 percent. Japan's 10-year government bond yields increased by 5.5 basis points to 2.965 percent.