Treasury yields up as collapse of Iran talks clouds inflation outlook
Treasury yields rose slightly on Monday as the breakdown in talks between Iran and the United States once again clouded the inflation outlook.
The yield on the 10-year U.S. Treasury note, a gauge of government debt, rose more than 1 basis point to 4.333%.
The yield on the 2-year Treasury note, which is more sensitive to short-term Federal Reserve interest rate decisions, rose more than 2 basis points to 3.8242%. The yield on the longer-dated 30-year Treasury note also rose less than 1 basis point to 4.923%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
Investors are reacting to US plans to blockade the Strait of Hormuz after weekend talks between Washington and Tehran failed to reach an agreement to end the Middle East conflict.
“Effective immediately, the U.S. Navy, the Best Navy in the World, will begin the process of BLOCKING all Ships attempting to enter or exit the Strait of Hormuz,” Trump said in a post on the social media platform. Real Social Sunday.
Yields are also digesting inflation data on Friday, which showed core prices rising less than feared despite a rise in energy prices since the start of the Iran war.
The latest US CPI reading reached a 2-year high, raising concerns that the shock to energy prices could spread to other goods and services.
“President Trump will not be very happy with today’s inflation numbers, and given his heavy criticism of Joe Biden’s handling of inflation during his tenure as President, we can expect him to be quite sensitive to such a significant swing,” said Richard Carter, head of fixed interest research at Quilter Cheviot.
“Trump will pin his hopes on maintaining the ceasefire, as if if peace talks are not productive then there is a risk that the ceasefire will escalate further.”
Investors will be awaiting industrial production data for March, which could show some early signs of the impact of the increase in oil prices on the US industry.
