Yields on longer-dated Treasuries climbed to new highs on Tuesday amid a global market selloff in longer-dated bonds driven by war-related inflation concerns.
The 30-year Treasury bond’s yield, which is seen as a barometer of political risk, climbed on Tuesday to 5.197 per cent, its highest in 19 years. It was last up 5.4 basis points at 5.177 per cent.
The yield on the benchmark 10-year Treasury note surged to as high as 4.687 per cent, its highest since January 2025. It was last up 8.5 bps at 4.671 per cent.
A selloff in U.S. and global bond markets has taken hold over the past week as peace talks between the U.S. and Iran have stalled and energy prices have remained elevated since the start of the war in late February. Crude oil prices hit $111 per barrel on Monday.
Analysts anticipate yields on the 30-year and other long-dated Treasuries could rise further even with a near-term end to the war, which they say may not bring energy prices down.
“People are not going to want to add duration risk until there’s clarity around the Middle East,” said Vail Hartman, U.S. rates strategist at BMO Capital Markets.
“I wouldn’t be surprised if the selloff extended and ... new yield peaks (are) established before we see a wave of buying,” he added.
The shorter-dated two-year Treasury note yield, which typically moves in step with interest rate expectations for the Federal Reserve, was last up 7.8 bpsat 4.124 per cent. It earlier climbed to 4.139 per cent.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was last at 53.69 bps.
Investors are now pricing in a 56.5 per cent chance the Fed could raise rates in December, and a 94.2 per cent chance it maintains current rates at its next meeting in June, according to the CME FedWatch tool.
Some market participants view the selloff in longer-dated bonds as a test for the incoming Trump-nominated Fed Chair Kevin Warsh, who was confirmed by the Senate this month, said Lou Brien, strategist at DRW Trading.
“He may not want to talk too much about the Fed’s process, but at the very least he needs to get the bond market to believe in how he plans to operate,” Brien wrote in a Monday note. “The bond market will demand it.”
The Treasury Department is slated to auction 20-year bonds on Wednesday, which market participants will watch closely for signs of any cooling investor demand.