Bond sell-off deepens and oil rises as Iran-US deal hopes fade

{"text":[[{"start":11.401,"text":"US borrowing costs hit their highest level since the onset of the global financial crisis, as fading hopes of a deal between Washington and Tehran drove up oil prices and a sell-off in the Treasury market deepened."}],[{"start":24.36,"text":"Brent crude rose more than 4 per cent to a high of $108.83 a barrel on Monday, after US President Donald Trump rejected Iran’s proposal to reopen the Strait of Hormuz, leaving no clear path to ending the seven-month war. Oil prices pared the gains later and settled 0.9 per cent higher at $105.28."}],[{"start":46.96,"text":"The renewed selling pressure on US Treasuries sent yields on 10-year bonds up as much as 0.09 percentage points to 5.27 per cent, the highest since June 2007. Yields have risen for five consecutive sessions and are up more than 0.5 percentage points since mid-August, when Treasury secretary Scott Bessent announced an expanded bond buyback programme designed to calm the market."}],[{"start":71.64,"text":"The interest rate-sensitive US two-year yield also rose on Monday to 4.96 per cent, a 28-month high. Yields on both instruments backed off the highs in Monday afternoon trading."}],[{"start":83.56,"text":"“The potential fallout on the global economy from the war with Iran remains a key driver of the macro narrative,” said Ian Lyngen, head of US interest rate strategy at BMO Capital Markets. “There will, eventually, come a point at which the moves in energy will no longer have such an impact on US rates. Clearly, the market has yet to reach such an inflection point.”"}],[{"start":104,"text":"Lyngen said that selling pressure on the 10-year Treasury could push its yield beyond 5.35 per cent before investors are incentivised to jump back into the market. Yields around that level would be at their highest in almost a quarter-century."}],[{"start":null,"text":"

"}],[{"start":117.28,"text":"The rise in bond yields and oil prices also weighed on stocks, with the S&P 500 closing 0.8 per cent lower and the Nasdaq 100 dropping 1.1 per cent."}],[{"start":127.362,"text":"US borrowing costs have soared in recent weeks to levels not seen since before the global financial crisis, as signs of persistent inflation and strong growth in the world’s biggest economy have prompted investors to bet on higher interest rates."}],[{"start":140.32,"text":"The jump in yields has also pushed US mortgage rates above 7 per cent, as the bond sell-off translates into higher borrowing costs for Americans — just weeks before crucial midterm elections in which the country’s affordability crisis has become a central issue."}],[{"start":155.589,"text":"US voters have soured on Trump’s handling of the economy, sending his approval ratings sharply lower. Polls reveal deep voter disquiet about his war in Iran and its costs."}],[{"start":166.96,"text":"The Federal Reserve raised borrowing costs earlier this month for the first time since 2023, and investors in futures markets are betting on two more quarter-point rises by January — a marked shift from the cuts that had been expected before the US-Iran war sent energy prices soaring."}],[{"start":183.36,"text":"Ajay Rajadhyaksha, global chair of research at Barclays, said there was “nothing magical about these yield levels”, and it would take something substantial to reverse the sell-off, such as “if the US economy starts to slow down” or higher rates start “biting” risky assets such as stocks. “That would be one sign that we have perhaps gone far enough.”"}],[{"start":203.244,"text":"UK government bonds also weakened further on Monday, with the 10-year gilt yield rising to 5.44 per cent — its highest level since 2007."}],[{"start":213.42,"text":"The sell-off on Monday also pushed French and Italian 10-year bond yields to fresh multiyear highs, with French borrowing costs at their highest level since 2008."}],[{"start":223.04,"text":"Other big central banks are also expected to make a series of rate rises in the coming months to contain a burst of inflation set off by the conflict."}],[{"start":null,"text":""}],[{"start":231.38,"text":"Pooja Kumra, a rates strategist at TD Securities, said the bond sell-off was being powered by a combination of “persistent economic resilience” and the lack of a roadmap to “how the war might be resolved”, which was pushing investors to bet on rates remaining higher for longer."}],[{"start":246.84,"text":"Paul Watters, head of European credit research at S&P Global Ratings, said: “Our sense is that [bond] yields could grind higher” from here, in part because “we see the energy price shock continuing through 2027”."}],[{"start":259.06,"text":"“The buffers are eroding” in global energy reserves, Watters pointed out, referring to countries using up their stockpiles."}],[{"start":259.56,"text":"Data visualisation by Ray Douglas"}],[{"start":275.04,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1790641465_2516.mp3"}