U.S. Treasury yields rose across the curve on Tuesday as investors saw escalating tensions in the Middle East and reports of mediation efforts to end ongoing hostilities.
The yield on the US Treasury at 10 years The rating – the key benchmark for U.S. government borrowing – rose more than 3 basis points to 4.63%.
THE 2-year Treasury bill the yield, which more closely tracks the Federal Reserve’s short-term interest rate policy, gained 4 basis points to 4.255%. The most dated 30-year Treasury bond the yield rose more than 2 basis points to 5.139%.
One basis point is 0.01%, and yields and prices move inversely to each other.
BMO Capital Markets said the Treasury market remained relatively stable despite the latest escalation in the Middle East, as reports that mediators tabled new ceasefire proposals dampened oil prices on Tuesday.
However, with little U.S. economic data expected this week, strategists warn that government bonds could remain vulnerable to sharp movements in energy prices and developments in the Iranian conflict.
“The extent to which nominal yields can fall will be tempered by continued market focus on the energy sector and geopolitical tensions,” BMO strategists said, adding that July and August inflation reports would be needed before investors could conclude that energy-related inflationary pressures had peaked.
In the United Kingdom, yields on 10-year government bonds rose on Monday after new Prime Minister Andy Burnham said he would show flexibility under the government’s fiscal rules. Yields on 10-year gilts last rose slightly on Tuesday.
Investors will be watching the latest S&P Global Flash US PMI report due Friday, which measures the economic health of the US manufacturing and services sectors.
— CNBC’s Lee Ying Shan also contributed to this report.