Yields climb as US-Iran conflict wears on. Treasury yields rose across the curve today, alongside oil, as the US and Iran continued launching strikes in the Middle East. The 2-year yield closed 4 bps higher at 4.30%, while the 10-year yield closed 3 bps higher at 4.65%. Meanwhile, Brent crude settled around $95 per barrel, up nearly 5% on the day. Equities edged down, with the S&P 500 and NASDAQ closing 0.14% and 0.57% lower, respectively.
US-Iran conflict widens as Trump threatens Iranian infrastructure and nuclear sites. The US carried out its eleventh consecutive night of strikes while Iran said it targeted US military facilities in Kuwait, Jordan, and Bahrain. President Trump threatened civilian targets, vowing to “destroy one bridge or power plant” each time Tehran fires on a ship in the Strait of Hormuz, adding that the US would strike any suspected nuclear site. Iran’s foreign minister responded that his nation would retaliate “an eye for an eye.” Meanwhile, there were reports of a Houthi attack on a Saudi ship in the Red Sea, the first signs of fighting since the militia announced it’s maritime blockade on Monday.
Bank of Japan reportedly open to faster pace of rate hikes. BOJ officials may hike policy rates at a faster pace than previously anticipated as a weak yen increases inflation risks. The Japanese yen is hovering around its weakest level against the US dollar in nearly 40 years, which is driving companies to raise prices for consumers. Simultaneously, fuel costs are rising again due to renewed escalation in the Middle East. The BOJ is expected to keep rates unchanged at 1% at their upcoming July meeting, and markets currently do not have a rate hike priced in for the remainder of the year.
