TREASURIES-US yields rise as soaring oil stokes inflation fears
SINGAPORE, March 9 (Reuters) - U.S. Treasury yields rose on Monday, as oil prices burst past $100 per barrel amid a rapidly escalating war in Iran, spurring fears of rising inflation and elevated interest rates that outweigh the safe-haven allure of bonds.
Oil surged about 20% in early trade to their highest since July 2022, as the U.S.-Israeli war with Iran prompted some major Middle Eastern oil producers to cut supplies. O/R
Iran on Monday named Mojtaba Khamenei as successor to his father Ali Khamenei as supreme leader, a move seen as cementing hardline control.
The announcement triggered a broad risk-off move in the markets, with stocks sinking and the dollar gaining against most other currencies. FRX/
Treasuries were also sold off as investors worried that higher energy prices could make it harder for the Federal Reserve to cut rates.
The yield on the benchmark U.S. 10-year Treasury note US10YT=RR rose 5.9 basis points to 4.1906, highest since February 12. The yield surged 17 bps last week as markets contended with the widening war in the Middle East.
The yield on the 30-year bond US30YT=RR advanced 5.2 bps to 4.8082%, also the highest since February 12.
The two-year Treasury yield US2YT=RR, which is highly sensitive to Fed policy expectations, gained 5.8 basis points to 3.614%.
"The situation in the Middle East remains highly fluid, making it difficult to forecast short-term oil price movements with confidence," said Vasu Menon, managing director for investment strategy at OCBC in Singapore.
"Given President Donald Trump's earlier statement that the selection of Iran's new leader is unacceptable to his administration, it is unclear whether this could lead to further escalation, including potential military actions aimed at destabilising or removing him," Menon said, referring to Mojtaba's succession.
Investor attention now turns to U.S. consumer price data due on Wednesday, with forecasts pointing to the annual pace holding at 2.4% in February.
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