“Two or three days. Maybe Friday, Saturday, Sunday. Maybe early next week. A limited period of time.”
The yield on the 30-year U.S. Treasury rose to 5.18 percent on Tuesday, pushing Treasury yields to a 2007 high not seen since the lead-up to the global financial crisis, as bond markets repriced for a longer war in Iran. The 10-year yield reached 4.67 percent. The average 30-year mortgage rate climbed to 6.36 percent, up from below 6 percent before the conflict began, according to data reported by the New York Times.
Asked Tuesday how long Iran had to return to negotiations, President Trump told reporters: “Two or three days. Maybe Friday, Saturday, Sunday. Maybe early next week. A limited period of time.”
Treasury Yields 2007 High Holds as Fed Pick Promised Cuts
Before the war began, futures markets had priced in at least a half-point in cuts by January. Traders now expect a quarter-point rate hike instead.
The repricing has held even after the appointment of Kevin Warsh as Federal Reserve chair. The president nominated Mr. Warsh with the stated goal of lowering rates. Fed officials at the March meeting said that higher inflation for longer could support a case for rate hikes, according to a Charles Schwab analysis.
“I think there is just a lot of fear out there right now and a collective hesitancy to step in front of the sell-off,” Vail Hartman, a U.S. rates strategist at BMO Capital Markets, told the Times. Joseph Purtell, a portfolio manager at Neuberger Berman, said the market was “pricing in some kind of premium for that uncertainty.”
Global Yields and the Strait of Hormuz
Bond yields rose to 12-month highs in Canada, Germany, France, Spain, Portugal, the Netherlands, and Switzerland. In Britain, where Prime Minister Keir Starmer faces a leadership crisis, the 30-year gilt yield reached its highest level since 1998. Japan’s 30-year bond yield reached 4.13 percent, the highest on record.
The pressure on long-dated debt comes as the cease-fire has stalled and the Strait of Hormuz remains blockaded. Roughly a fifth of the world’s oil supply moved through the strait before the war. A weekend summit between Mr. Trump and Xi Jinping ended without a Chinese commitment to help pressure Tehran.
Housing Market Complications
The rising yields are likely to complicate the administration’s other priorities, including the stated goal of reviving the housing market. Asked Tuesday whether the 6.36 percent mortgage rate would slow that agenda, a Treasury Department official said the view was that “rates will normalize once Iran becomes a reasonable trading partner again.”
The Trump Organization currently has 25 branded development projects under way in 12 foreign countries, including planned tower and resort projects in Saudi Arabia, the United Arab Emirates, Oman, and Qatar, according to CREW’s foreign development tracker. A Trump Organization spokesperson did not respond to a request for comment about whether any of the Gulf-region developments have been affected by the bond market sell-off.
Developing.
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