US Treasury yields are stirring again as military conflict between the United States and Iran resumes. International oil prices reversed course to rise for the first time in two weeks, stoking inflation concerns, while minutes released from the Federal Reserve's June meeting showed that a few members left open the possibility of tightening, raising tension across the bond market.
According to Bloomberg and other sources on the 8th, the benchmark 10-year US Treasury yield (based on yield to maturity) rose 2.9 basis points (a basis point equals 0.01 percentage point) from the previous session to 4.581% in the New York bond market that day. Yields, which had been declining amid a ceasefire mood in the Middle East, surged to their highest level since May this year. The 30-year yield, an ultra-long-term bond, also rose 1.7 basis points to 5.074%, while the 2-year yield, which is sensitive to monetary policy, jumped 3.3 basis points to 4.220%. A rise in bond yields means a decline in bond prices.
As US Treasury yields jumped, the 10-year government bond yield in Japan's bond market also rose 3.5 basis points to 2.90% on the 9th. This is the highest level in about 30 years, since September 1996. Government bond yields in major European countries such as Germany and the United Kingdom also climbed to their highest levels in about a month.
The simultaneous rise in yields across major countries stems from concerns over inflationary pressure driven by escalating tensions in the Middle East. As US President Donald Trump stated that the ceasefire with Iran had effectively ended and took military action, Brent crude and West Texas Intermediate (WTI) surged 4% to 5%.
The market's attention is turning to the Fed's monetary policy path. According to the minutes of the June Federal Open Market Committee (FOMC) meeting released that day, members assessed that concerns over weak employment had eased somewhat, while upside risks to inflation remained stubborn. A few members were confirmed to have expressed the view that it may be necessary to consider raising the base rate, taking into account the fallout from the Middle East war.
Fed members also assessed that expanded artificial intelligence (AI) investment and tariff increases could keep price pressures elevated. The minutes stated that "almost all participants judged that if upside scenarios materialize, some degree of tightening would likely be necessary." However, members also added the caveat that if price pressures ease, it would be appropriate to keep rates at current levels or to shift toward cuts going forward.
