Treasury Yields Jump as Oil Surges on Threat of New Iran Attacks
US two-year Treasury yields reached 3.86% and 10-year yields hit 4.38% after President Trump vowed fresh strikes on Iran within three weeks, fueling an oil price jump. The ISM manufacturing prices-paid index rose to 78.3 in March, erasing market expectations for Fed rate cuts this year.
1. Geopolitical Tensions Escalate
President Trump’s announcement of planned new strikes on Iran within two to three weeks raised concerns over a prolonged Middle East conflict and its economic fallout, reversing hopes for a swift resolution.
2. Treasury Market Reaction
US two-year Treasury yields climbed as much as six basis points to 3.86%, while 10-year yields rose to 4.38%, marking the largest monthly increase for the 10-year yield since late 2024.
3. Oil Prices and Inflation Pressure
Crude oil prices surged on the threat of renewed hostilities, driving the ISM manufacturing prices-paid index to 78.3 in March—the highest level since mid-2022—and stoking renewed inflation concerns.
4. Fed Rate Outlook and Market Sentiment
Markets have priced out more than two expected Federal Reserve rate cuts for this year and now anticipate rates to remain on hold, while some asset managers prepare for a bond-market rebound amid slowing growth prospects.