Treasury Yields Rise Amid Iran Worries, Broader Selloff

Treasury yields climbed for a third straight session on Tuesday, as anxiety over the U.S.-Iran conflict and inflation converged with a global bond selloff that pushed long-term borrowing costs toward their highest levels in decades.

A third straight day of gains

The 30-year Treasury nudged up to its highest level since 2007. The benchmark 10-year yield, which has been climbing since the start of the Iran conflict, flirted with its highest point since early 2025.

The 10-year Treasury note rose 2 basis points to 4.744%. The 30-year bond rose 1.3 basis points to 5.323%.

Iran sets the market’s direction

Will Compernolle, macro strategist at FHN Financial in Chicago, said yields were likely drifting higher in part because light summer trading volumes and a week with few economic indicators left Middle East tensions to set the tone. No U.S. central bank policymakers made public remarks this week either.

The collapse of the memorandum of understanding that Washington and Tehran had reached in June showed the energy shock was likely to persist, he added.

“I think that’s weighing on bonds because we’re living in this world where we’re going to have supply shock after supply shock,” Compernolle said. He also noted that fixed income is competing with capital drawn to soaring capital expenditures for artificial intelligence.

Industrial production cools

The Federal Reserve reported that July growth in U.S. industrial production cooled by a tenth of a percentage point to 0.2%, undershooting economists’ expectations, partly due to a decline in production of consumer goods.

The yield curve and inflation expectations

The gap between two- and 10-year Treasury yields, closely watched as a gauge of economic expectations, stood at a positive 54.4 basis points.

The two-year Treasury yield, which typically tracks Fed rate expectations, rose 1.6 basis points to 4.198%.

The breakeven rate on five-year Treasury Inflation-Protected Securities stood at 2.268%, after closing at 2.253% on August 17. The 10-year TIPS breakeven rate stood at 2.297%, indicating the market expects inflation to average about 2.3% a year over the next decade.