U.S. 10-year bond yield rises to highest since 2007, driven by Iran conflict and expectations of rate hikes
Quick Look
- On Tuesday, the U.S.
- 10-year bond yield rose to 5.041%, the highest since July 2007, driven by soaring oil prices due to the Iran conflict and market expectations that the Federal Reserve will raise interest rates this week.
- The 2-year U.S.
AI-generated summary
Why It Matters
The U.S. 10-year bond yield has exceeded 5% for the first time since 2007, mainly driven by the dual impact of rising oil prices due to the Iran conflict and market expectations that the Federal Reserve will raise interest rates this week.
On Tuesday, the U.S. 10-year bond yield hit 5.041%, the highest since July 2007. (Reuters photo)
[Financial Channel/Comprehensive Report] The benchmark 10-year U.S. Treasury bond yield climbed to the highest level since 2007 on Tuesday (15th) due to the surge in oil prices caused by the Iran conflict and the widespread expectation that the Federal Reserve will raise interest rates after this week’s monetary policy meeting.
According to comprehensive foreign media reports, after breaking through 5% on Monday, the 10-year bond yield rose by more than 3 basis points on Tuesday, once reaching 5.041% during the session, the highest since July 2007; the 30-year bond yield, which is more sensitive to geopolitical risks, rose by more than 3 basis points to 5.367%, and once touched 5.401% during the session, which was also the highest since June 2007.
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The 2-year U.S. Treasury yield rose more than 3 basis points to 4.669%. It hit 4.688% intraday, the highest since July 2024.
Traders currently generally predict that the Fed will raise its benchmark interest rate after its policy meeting on Wednesday (16th), which will be the first rate increase since 2023. Analysts said a surprise move by the Fed to keep interest rates on hold could accelerate a bond market selloff that has pushed yields higher in recent weeks.
Liang Wenwei, Chief Investment Officer of Standard Chartered Fixed Income and Foreign Exchange, pointed out that the U.S. 10-year bond yield is extremely sensitive to inflation expectations, and the current inflation index is still higher than the Federal Reserve's 2% target. This close relationship is expected to continue for some time.
Experts also mentioned that if oil prices remain high, the close relationship between oil and U.S. Treasury bonds may further push up yields, as rising energy costs will push up inflation expectations.
Steve Sosnick, chief strategist at Interactive Brokers, said that simply put, rising oil prices lead to rising inflation expectations and vice versa. Normally the relationship would not be as clear cut as it is now, but the geopolitical drivers behind oil prices and global inflation are so prominent that an otherwise less obvious correlation becomes even stronger. So as long as oil prices continue to rise, it will put pressure on interest rates.
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What to Watch
AI outlook — possibilities, not facts
The Fed will raise interest rates by 25 basis points after Wednesday's policy meeting
Likely · Within days
If oil prices remain high, the U.S. 10-year bond yield will rise further
Possible · Within weeks
Open Questions
- Will the Fed raise interest rates as expected?
- If oil prices continue to rise, to what extent will yields rise further?
- How much pressure will this round of rising yields put on emerging market debt repayments?
