WASHINGTON, Aug 18 (Reuters) – U.S. yields headed higher for a third straight session on Tuesday, as anxiety over the U.S.-Iran conflict and inflation converged with a global bond selloff that saw long-term borrowing costs edge toward their highest levels in decades.
The U.S. 30-year Treasury nudged up to its highest level since 2007, while the benchmark 10-year, which has been climbing since the start of the Iran conflict, was flirting with its highest point since early 2025.
Will Compernolle, macro strategist at FHN Financial in Chicago, said U.S. yields were likely drifting higher in part because, amid light summer trading volumes, the week had few economic indicators and no public remarks from U.S. central bank policymakers, leaving Middle East tensions to set the direction.
The collapse of the MOU reached by Washington and Tehran in June showed that the energy shock was likely to persist, he added.
“I think that’s weighing on bonds because we’re living in this world where we’re going to have supply shock after supply shock,” said Compernolle, adding that fixed income was also having to compete with capital attracted to the soaring capital expenditures for artificial intelligence.
Meanwhile, the Federal Reserve reported that July growth in U.S. industrial production had cooled by a tenth of a percentage point to 0.2%, undershooting economists’ expectations in part due to a decline in production of consumer goods.
The yield on the benchmark U.S. 10-year Treasury note was last up 2 basis points to 4.744%. The yield on the 30-year bond rose 1.3 basis points to 5.323%.
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 at a positive 54.4 basis points.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, rose 1.6 basis points to 4.198%.
The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities was last at 2.268% after closing at 2.253% on August 17.
The 10-year TIPS breakeven rate was last at 2.297%, indicating the market sees inflation averaging about 2.3% a year for the next decade.
(Reporting by Douglas Gillison in Washington; Editing by Sharon Singleton)
