Treasury yields edge higher as U.S. and Iran exchange strikes

• Oil prices surged over 4% to $90.92 per barrel and Brent crude jumped 3.6% to $94.37 as conflict near the strategically important Strait of Hormuz shipping channel raised supply concerns
• The ISM manufacturing PMI for May is expected at 53, up from April's 52.7, with investors monitoring data for signs of rising costs in the U.S. economy
• Former Federal Reserve chair warned that Trump administration pressure on the central bank to lower interest rates risks undermining public faith in the Fed's independence

Market Summary: Treasury Yields Rise Amid U.S.-Iran Military Tensions

Key Market Movements

U.S. Treasury yields edged higher on Monday following renewed military exchanges between the U.S. and Iran near the Strait of Hormuz shipping channel. The 10-year Treasury yield rose more than 1 basis point to 4.4729%, serving as the benchmark for mortgages, auto loans, and credit card debt. The 2-year note increased over 2 basis points to 4.0390%, while the 30-year yield remained steady at 4.9958%.

Geopolitical Context

Weekend military strikes between the U.S. and Iran dashed hopes for a ceasefire extension that had appeared likely on Friday. The conflict's proximity to the strategically critical Strait of Hormuz—a vital global shipping channel—heightened market concerns about supply disruptions.

Commodity Impact

Oil prices surged in response to heightened tensions, with crude jumping more than 4% to $90.92 per barrel and Brent crude rising 3.6% to $94.37 early Monday.

Economic Data Ahead

Investors await the Institute for Supply Management's manufacturing index for May, expected at 53 versus April's 52.7. The April reading matched March's level, which was the highest since April 2022. This data will provide insights into potential cost pressures within the U.S. economy.

Federal Reserve Commentary

Former Federal Reserve Chair warned that Trump administration pressure on the central bank to lower interest rates could undermine public confidence in the Fed's independence.

Market Implications

Rising yields reflect flight from bonds amid geopolitical uncertainty and inflation concerns driven by oil price increases. The situation presents challenges for borrowers facing higher rates and could complicate the Federal Reserve's monetary policy decisions.