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US Treasury yields edged higher on Monday as the breakdown in negotiations between Iran and the US again clouded the inflation outlook.
The yield on the 10-year U.S. Treasury, the benchmark for government borrowing, rose more than 3 basis points to 4.355%.
The yield on the two-year Treasury note, which is more sensitive to the Federal Reserve’s short-term interest rate decisions, rose more than 3 basis points to 3.837%. The yield on 30-year government bonds also rose by more than 3 basis points to 4.946%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
Investors are reacting to US plans to close the Strait of Hormuz after talks between the US and Iranian governments over the weekend failed to reach an agreement to end the Middle East conflict.
“Effective immediately, the United States Navy, the world’s greatest navy, will begin the process of blockading any vessels attempting to enter or exit the Strait of Hormuz,” President Trump said in a post on his social media platform Truth Social on Sunday.
Yields also digested Friday’s inflation results, showing that despite the highest energy prices since the start of the Iran war, core prices were not rising as much as feared.
The latest US CPI figures hit a two-year high, raising concerns that the energy price shock will spill over into other goods and services.
“President Trump is not going to be happy with today’s inflation trends, and given that he has been harshly critical of Joe Biden’s response to inflation during his presidency, we would expect him to be quite sensitive to such large swings,” said Richard Carter, head of fixed-rate research at Quilter Cheviot.
“President Trump will be pinning his hopes on the continuation of the ceasefire, as there is a real risk of further escalation if peace talks are not productive.”
Investors will be watching industrial production data for March, which could provide an early sign of the impact of rising oil prices on U.S. industry.
