Oil prices rise and US Treasury yields increase after Trump rejects Iran proposal

After U.S. President Trump rejected Iran's latest proposal to reopen the Strait of Hormuz, oil prices in Asia rose on Monday, heightening inflation concerns and prompting a renewed sell-off of U.S. Treasuries. The yield on the interest-rate-sensitive two-year U.S. Treasury climbed 5 basis points to 4.90%, while the 10-year yield rose 4 basis points to 5.20%. Sovereign bonds in Japan and Australia also declined. Previously, yields on U.S. Treasuries across all maturities surged to multi-year highs last week, as the market focused on the U.S. Federal Reserve's recent policy statements and decisions. Damien McColloch, Head of Fixed Income Research at Westpac, stated: "Continuous hawkish signals from the Federal Reserve, along with oil prices remaining above $100 per barrel, are key factors driving a bearish outlook on bonds."