Borrowing costs rose as the 10-year Treasury yield climbed to 4.788%, its highest reading since Jan. 14, 2025. That shift pushed the market rates that underpin mortgages, auto loans and credit-card borrowing higher, widening the cost of credit across the economy.
Longer-dated debt moved up along the curve, with the 30-year Treasury yield reaching 5.272% and the 2-year note, which tracks short-term Federal Reserve policy expectations, at 4.362%. The 10-year advanced 3 basis points, the 30-year gained just over 2 basis points, and the 2-year climbed a bit more than 1 basis point. Because yields and bond prices move in opposite directions, the readings reflect a drop in prices and mark-to-market losses for existing holdings.
Traders linked the move to a fresh rise in geopolitical risk in the Middle East. U.S. forces launched new strikes against Iran, and unknown projectiles struck a tanker off Oman in the Strait of Hormuz, an escalation that pushed oil higher. West Texas Intermediate futures were trading above $87 per barrel, and Brent crude rose to above $92, each up more than 1%.
Those developments heightened concern that energy-driven inflation could re-emerge and complicate the interest-rate outlook. "With no clear path to reopening the Strait after six months of war, inflation worries remain elevated. Uncertainty over the Federal Reserve's policy outlook, fiscal concerns, and rising AI-related debt issuance have all kept bonds under pressure," Ulrike Hoffmann-Burchardi, UBS chief investment officer of the Americas and global head of equities, wrote in a Tuesday note. She added that yield volatility is likely to persist in the near term.
Market participants are now watching the G20 finance ministers' meeting in Asheville, North Carolina, which is set to conclude later Tuesday. Domestic data will also matter, with ISM Manufacturing PMI and the Job Openings and Labor Turnover Survey due this week, and nonfarm payrolls scheduled for Friday. Those releases, together with any further geopolitical developments, are likely to dictate where yields settle next and how quickly borrowing costs filter through to consumers and companies.
