Treasury yields edge higher as investors map geopolitical risks
U.S. Treasury yields were higher on Tuesday as investors mapped rising tensions in the Middle East and reports of mediation efforts to end ongoing hostilities.
The yield on the 10-year U.S. Treasury note, the key benchmark for U.S. government debt, rose more than 3 basis points to 4.63%.
The yield on the 2-year Treasury note, which more closely tracks short-term Federal Reserve interest rate policy, rose 3 basis points to 4.245%. The yield on the longer-dated 30-year Treasury note rose more than 2 basis points to 5.141%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
BMO Capital Markets said the Treasury market remained relatively stable despite recent tensions in the Middle East, as reports that negotiators offered new ceasefire proposals softened oil prices on Tuesday.
But with little U.S. economic data due this week, strategists warn that government bonds could remain vulnerable to sudden moves in energy prices and developments in the Iran conflict.
“The degree to which nominal yields can decline will be diminished by the market’s continued focus on the energy sector and geopolitical tensions,” BMO strategists said, adding that inflation reports for July and August will be needed before investors can conclude that energy-related inflation pressures have peaked.
U.K. 10-year bond yields rose on Monday after new prime minister Andy Burnham said the government would use flexibility in its fiscal rules. The 10-year gilt yields last saw a slight increase on Tuesday.
Investors will watch the latest S&P Global Flash US PMI report on Friday, which measures the economic health of American manufacturing and services sectors.
— CNBC’s Lee Ying Shan also contributed to this report.
