Investors are rushing out of US debt as the war in Iran ignites worries about a fresh burst of inflation, sending the country’s borrowing costs surging by the most this month in a year and a half.
The two-year Treasury yield, which is particularly sensitive to Federal Reserve interest rate expectations, has soared half a percentage point so far this month to 3.9 per cent, while the 10-year yield, a key benchmark for borrowing costs worldwide, has jumped 0.44 percentage points to 4.38 per cent. Both increases are the biggest since October 2024.
A $69bn auction of two-year Treasuries on Tuesday drew tepid investor demand. Primary dealers, big banks that soak up debt not purchased by other institutions or investors, scooped up the biggest portion of the deal since October 2022, according to Vail Hartman at BMO Capital Markets.