US bonds buckle on hotter inflation, higher oil, and UK political turmoil
Bonds are under pressure from inflation and political instability, while equity markets show modest gains amid rising oil prices and Treasury yields.
Bonds faced significant pressure this week due to rising inflation, escalating oil prices, and political instability in the UK. Treasury yields surged by 18 to 25 basis points, marking the largest weekly increase since April 2025.
The intermediate sector of the yield curve was particularly affected, with markets now anticipating over 30 basis points of Federal Reserve rate hikes by next April, a sharp increase from just 7 basis points the previous week. Weak demand for Treasury auctions further compounded the situation, while oil prices rose by 8% to 10%.
In the equity markets, the S&P 500 and Nasdaq saw modest gains, but rising oil prices and Treasury yields dampened overall performance. The dollar index strengthened by 1.4% amid safe-haven flows, reflecting investor caution.
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