Treasury yields edge higher as investors map geopolitical risks
U.S. Treasury yields were higher across the curve on Tuesday as investors mapped escalating tensions across the Middle East and reports of mediation efforts to put a stop to ongoing hostilities.
The yield on the 10-year U.S. Treasury note — the key benchmark for U.S. government borrowing — was up more than 3 basis points at 4.63%.
The 2-year Treasury note yield, which more closely tracks short-term Federal Reserve interest rate policy, gained 3 basis points to 4.245%. The longer-dated 30-year Treasury bond yield was edged up more than 2 basis points to 5.141%.
One basis point is equal to 0.01%, and yields and prices move inversely to each other.
BMO Capital Markets said the Treasury market has remained relatively steady despite the latest escalation in the Middle East, as reports that mediators have tabled fresh ceasefire proposals tempered oil prices on Tuesday.
With little U.S. economic data due this week, however, strategists warn that government bonds could remain vulnerable to abrupt moves in energy prices and developments in the Iran conflict.
“The degree to which nominal yields can decline will be tempered by the market’s ongoing focus on the energy sector and geopolitical tensions,” the BMO strategists said, adding that July and August inflation reports would be needed before investors could conclude that energy-driven inflation pressures had peaked.
In the U.K., 10-year gilt yields rose on Monday after new prime minister Andy Burnham said he would use flexibility within the government’s fiscal rules. 10-year gilt yields were last seen up slightly Tuesday.
Investors will be monitoring the latest S&P Global Flash U.S. PMI report due Friday, which measures the economic health of American manufacturing and services sectors.
— CNBC’s Lee Ying Shan also contributed to this report.
