Treasury Yields Soar as Iran Conflict Escalates
US Treasury yields rose on Tuesday following another round of strikes in Iran, fueling inflation concerns. The recent escalation between the US and Iran has sparked worries about rising oil prices, which have already increased by over 4% this week.
The yield on the benchmark 10-year Treasury note climbed to 4.792%, its highest level since January 14, 2025, after touching 4.798%. This marks a fifth consecutive session of gains for the 10-year yield, its longest streak since March.
Bill Merz, head of capital markets research and portfolio construction at US Bank Wealth Management Group in Minneapolis, noted that it's not the level of yields that's concerning but rather the trend. If this persists, it will start to affect how companies are valued and investors discount their cash flows, he said.
The rising costs may prompt the Federal Reserve to raise short-term rates to combat inflation. Fed Governor Michael Barr stated that if inflation does not cool down quickly, it would be time for the central bank to increase rates. The market now expects a 25-basis-point hike at the September 15-16 meeting, with expectations standing at 66.2%, up from 39.6% last week.