US-Iran Tensions Spark Bond Yields Surge

Global bond yields surged on Tuesday as renewed tensions between the US and Iran fueled inflation concerns. This led to increased expectations of interest-rate hikes in the coming months, according to data from LSEG.

The 10-year U.S. Treasury yield rose to 4.798%, its highest level since January 2025. The two-year Treasury yield also climbed to 4.369%, a 19-month high, as investors bet on an interest rate increase by the Federal Reserve in September.

Derivative markets now show one-year ahead U.S. inflation expectations at 2.5%, up from less than 2% previously. This uptick in inflation expectations could have significant implications for monetary policy and market performance.