U.S. Treasury yields climbed for a third consecutive session on Tuesday, with the 10-year note approaching its highest level since early 2025 as geopolitical tensions and a broad global bond selloff drove investors toward safer assets.
The benchmark 10-year Treasury yield rose 2 basis points to 4.744%, while the 30-year bond yield increased 1.3 basis points to 5.323%, nearing a two-decade high last seen in 2007. The 2-year note yield advanced 1.6 basis points to 4.198%, leaving the 2s/10s yield curve spread at 54.4 basis points.
The upward pressure on yields followed reports of escalating U.S.-Iran tensions, which have reignited concerns over potential energy supply disruptions. Analysts noted that light summer trading volumes and the absence of recent economic data or Federal Reserve commentary left geopolitical risks as the primary driver of market direction.
Federal Reserve data released on Tuesday showed U.S. industrial production grew 0.2% in July, missing expectations and reflecting a slowdown from the prior month. The decline was attributed in part to weaker consumer goods output, underscoring broader economic fragility amid rising borrowing costs.
Inflation expectations, as measured by the 10-year Treasury Inflation-Protected Securities (TIPS) breakeven rate, held at 2.297%, indicating that investors anticipate average annual inflation of roughly 2.3% over the next decade. The 5-year TIPS breakeven rate rose to 2.268% from 2.253% the previous day.
FHN Financial macro strategist Will Compernolle highlighted the compounding impact of supply shocks on fixed-income markets, stating that persistent disruptions are weighing on bonds. He also noted that heavy capital expenditures in artificial intelligence are diverting investment flows away from traditional fixed-income assets.
The selloff extended beyond U.S. Treasuries, with global bond markets experiencing broad-based declines as investors reassessed risk amid geopolitical uncertainty and shifting monetary policy expectations.
