(Bloomberg) — The US Treasury market fell, pushing 10- and 30-year yields to the highest levels in about two months, as a surge in crude oil prices stoked concern that inflationary pressures will prompt the Federal Reserve to raise interest rates.
Yields on Tuesday were higher by two to four points across maturities, with the 10-year yield rising to touch its highest since late May at 4.64%. As the US and Iran exchanged strikes for a 10th consecutive day, the dollar advanced against most major currencies.
“Today’s move is largely just a function of the continued rise in energy prices,” said Izaac Brook, a rates strategist at RBC Capital Markets. “The rates move has been exacerbated by the break back above highly-watched technical levels” — of 4.20% in two-year yields and 4.60% in the 10-year’s — “and typical summer trading conditions.”
A selloff in the bond market has wiped out the rally that followed the softer-than-expected inflation report released earlier this month. Brent crude, the global benchmark, rose to $91 a barrel as mediators work toward reviving a truce between the US and Iran.
Interest-rate futures showed traders see about a 20% chance that the Fed will raise interest-rate at the policy meeting next week. Fed Chairman Kevin Warsh has repeatedly emphasized that inflation remains a concern for the central bank, a point that’s been echoed by other officials in recent weeks. Policymakers are now in their customary quiet period ahead of the July meeting.
Adding to the case for higher yields, economic data pointed to continued resilience. The Philadelphia Fed’s services-sector survey showed activity expanded for the first time since October 2024.
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