On Tuesday morning, a global sell-off of government bonds was triggered by the deteriorating situation between the U.S. and Iran, following the collapse of peace negotiations. President Donald Trump's decision to not extend a ceasefire and Iran's threats of military action have heightened inflation fears, leading to increased borrowing costs. The yields on U.S.
Treasury bonds reached their highest levels in decades, with the 30-year yield at 5.3275%, the highest since 2002, and the 10-year yield at 4.74%, the highest since 2007. This trend was mirrored in international markets, with Germany's 10-year bund yield at a 15-year high and Japan's 10-year yield surpassing a 40-year high.
Analysts, including Dan Coatsworth from AJ Bell and Jim Reid from Deutsche Bank, noted that the rising yields reflect not only inflation expectations but also concerns over high government borrowing and the risks associated with long-dated bonds.
The ongoing conflict has also impacted oil prices, with Brent crude hovering above $90 a barrel, further complicating the economic landscape as investors brace for prolonged higher energy costs