Treasury Yields Reach Weekly Highs as Inflation Risk Mounts

The US Treasury Department seal. Photographer: Stefani Reynolds/Getty Images Photo by Stefani Reynolds /Photographer: Stefani Reynolds/AArticle content(Bloomberg) — Treasuries fell for a fourth day — lifting yields to the highest levels in several weeks — on concern that rising crude oil prices will stoke inflation.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentYields across maturities were higher by two to five basis points as the US benchmark crude oil futures contract topped $78 a barrel for the first time since June. It’s climbed from under $70 this week after the US attacked Iran on Feb. 28, leading traders to wager on a later start to any Federal Reserve interest-rate cuts this year.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentUS government bond yields remained elevated after the US government’s weekly tally of new jobless claims was slightly lower than economists estimated. While Friday’s release of February employment data is expected to show deceleration in job growth, the sign of labor-market strength is another challenge to wagers on Fed interest-rate cuts that benefit bonds.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article content“The market is not going to trade on economic data today,” said John Brady, managing director at RJ O’Brien. “It remains about the widening war in the Middle East and the energy markets.”Article contentYields on two-year notes, more closely tied than longer tenors to Fed rate changes, rose nearly five basis points toward 3.60%, the highest since Jan. 28. They’re about 20 basis points higher on the week, the biggest increase since April. The 10-year yield was around 4.14%, the highest since Feb. 12.Article contentSpeaking Thursday, Richmond Fed President Tom Barkin said inflation risk stemming from fuel prices had policy implications, and that the trend in consumer prices “certainly puts pause to any conclusion that we’re done fighting this.” Article contentArticle contentRelated story: Barkin Says Fed Response to War Depends on Length of ShockArticle contentAdding to upward pressure on Treasury yields, sales of new corporate bonds were expected to be heavy again on Thursday. Wednesday’s $17.7 billion haul began to clear a backlog that developed over the previous two days as the onset on Middle East hostilities eroded risk appetite.Article contentMany other government bond markets suffered steeper losses than Treasuries, particularly European markets, where most 10-year yields climbed by at least eight basis points. Article contentOil benchmarks extended their advance after reports China told its largest oil refiners to suspend exports of diesel and gasoline due to the escalating conflict in the Persian Gulf. Brent crude climbed toward $85 a barrel, extending this week’s gain to more than 15%.Article content“Higher oil, especially for longer, is going to pressure nominal yields higher,” said Kenneth Crompton, senior fixed-income strategist at National Australia Bank Ltd. “And Treasury yields, in our view, were too low to start with before hostilities began.”Article contentTraders have dialed back expectations for Fed interest-rate cuts as inflation expectations build. Swaps markets are currently pricing in about 35 basis points of rate cuts by year-end, compared with 60 basis points at the end of last week. At the time, a quarter-point cut was fully priced in by July. That shifted to September, and confidence in a move before October is slipping.Article contentThe Iran conflict has showed little sign of abating, with Tehran targeting Israel and Gulf states, and US and Israeli forces bombing targets in the Islamic Republic, including the sinking of an Iranian warship in international waters.Article content—With assistance from David Finnerty and Edward Bolingbroke.Article content(Adds comments and updates yield levels.)Article contentTrending Posthaste: Canada loses to the U.S. again, but this time it's not in the hockey rink News Bank of Canada governor warns of growing risks to financial stability Economy Legal fight over propane terminal clouds Canada's energy export push Energy Posthaste: This dormant pipeline needs to be restarted for the sake of Canada, economists say News Garry Marr: Why your house is still costing you, even if you've paid it off Personal Finance Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Posthaste: Canada loses to the U.S. again, but this time it's not in the hockey rink News Bank of Canada governor warns of growing risks to financial stability Economy Legal fight over propane terminal clouds Canada's energy export push Energy Posthaste: This dormant pipeline needs to be restarted for the sake of Canada, economists say News Garry Marr: Why your house is still costing you, even if you've paid it off Personal Finance