Oil Surge Sends Treasury Yields to Two-Decade High

US Treasury bond yields hit their highest level in over two decades as oil prices surged by nearly 3% after a Houthi missile attack on Saudi Arabia. This sent shockwaves through global markets, with the Dow Jones Industrial Average falling 0.31%, and the MSCI World Index dropping 0.29%. The jump in oil prices reignited concerns about higher inflation and more Federal Reserve interest rate hikes.

The yield on benchmark US 10-year notes increased to a high of 5.196% since 2007, while the 30-year bond yield gained to its highest level since 2004 at 5.4816%. The move in Treasury yields has been attributed to rising Fed hike expectations, higher growth expectations, and higher oil prices.

Gennadiy Goldberg, head of US rates strategy at TD Securities, said that the sharp rise in rates was likely exacerbated by investor positioning amid a rapid resurgence of oil prices. Meanwhile, Antonio Del Favero, head of US rates strategy at Macro Hive, stated that absent a drop of 20% or more in the S&P 500 and an even steeper decline in the Nasdaq Composite over an extended period, financial conditions are likely to remain loose.