Bond yields rise as elevated oil prices reignite threat of 'renewed pressure on inflation'
Bond yields rise as elevated oil prices reignite threat of 'renewed pressure on inflation'.
Bond yields rise as elevated oil prices reignite threat of 'renewed pressure on inflation'.
What happened: Bond yields continued to climb on Wednesday as oil prices rose amid an escalating conflict in the Middle East.
The 10-year yield ( ^TNX ), used as a benchmark for mortgage and loan rates , rose to 4.65% on Wednesday. The 30-year yield ( ^TYX ) climbed to 5.14% as the long-dated bond notched its longest stretch above 5% since 2007, the year prior to the financial crisis.
What geopolitical factors are driving current market tensions?
Why it's important: Yields on the 10-year and 30-year remained above key psychological levels, raising concerns over mounting debt and sticky inflation as the US attacked Iran for the 11th straight day, with the flow of oil through the Strait of Hormuz remaining a major point of contention between the two sides.
Over the past couple of weeks, investors have largely shrugged off rising oil prices as artificial intelligence became the central theme of economic and market growth.
"That balance could become harder to maintain if Brent approaches $100 and stays there, as higher energy costs would place renewed pressure on inflation, bond yields and expectations for Federal Reserve policy," explained Daniela Hathorn, senior market analyst at Capital.com. Brent crude ( BZ=F ) hovered near $93 per barrel on Wednesday.
"The coming sessions will therefore test whether earnings strength can continue to offset a worsening geopolitical backdrop," Hathorn added.
What else you need to know: The rise in bond yields comes as worries over a Federal Reserve rate hike this year have eased, given recent softer-than-expected inflation prints.
Read more: What experts say about the possibility of rate cuts this year
However, rising oil prices threaten to reignite inflation, which could sway the Fed and push it to tighten policy this year.
"While the June CPI report reduced the urgency for the Fed to raise interest rates, an assessment of the broader inflation picture suggests that at least one rate hike remains the base case for this year," the Yardeni Research team wrote in a note on Monday.
Investors are closely watching incoming economic data for clues about the outlook for inflation and monetary policy. Higher energy costs can feed through to consumer prices, potentially slowing progress toward the Fed's 2% inflation target.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre .
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Sinergia Empresarial continuará el seguimiento de esta información sobre bond yields rise as elevated oil prices reignite threat of 'renewed pressure on inflation' y ampliará la cobertura conforme se confirmen nuevos elementos relevantes para el ecosistema empresarial.
