US Government Bond Market in Turmoil Amid Rising Oil Prices and Rate Hike Expectations

The US government bond market is experiencing significant fluctuations due to rising oil prices from the war in Iran and the prospect of a rate hike by the Federal Reserve. The interest rate on the 10-year US Treasury rose to 5.041% on the 15th, surpassing the psychological Maginot line of 5% for the second day.

This marks the highest level since July 2007, just before the global financial crisis. The 30-year Treasury interest rate also soared to 5.401%, while the 2-year rate rose to 4.669%. Inflation concerns are spreading as international oil prices continue to rise above $100 a barrel.

The Federal Open Market Committee is expected to raise its benchmark interest rate by 0.25 percentage points on the 16th, with a probability of 92.4% according to the Chicago Mercantile Exchange FedWatch. US Treasury Secretary Scott Bessant attributed the rise in government bond rates to global issues and the need to resolve the fiscal deficit.