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Treasuries Head for Worst Run in a Month on Inflation Fears

(Bloomberg) — Treasuries are on course for their longest losing streak in a month as growing tensions between the US and Iran fuel oil-driven inflation fears.

US 10-year yields rose for a third day, up one basis points to 4.09%. Oil prices climbed Thursday to build on the previous day’s surge, following a report that American military intervention in Iran could come sooner than expected.

“A prolonged, US‑led operation aimed at regime change would likely have a far larger and more persistent impact on energy markets, challenging the disinflation narrative and pushing curves to potentially reassess medium‑term inflation risk,” said Evelyne Gomez-Liechti, a strategist at Mizuho International Plc.

Inflation concerns are already at the forefront of investors’ minds after minutes of the Federal Reserve’s Jan. 27-28 policy meeting revealed several officials suggested the central bank may need to raise interest rates if price growth remains stubbornly high.

Investors will also be focused on weekly US jobs numbers due Thursday, to corroborate the views revealed in the minutes showing the vast majority of participants judged that downside risks to employment had moderated in recent months.

Economists surveyed by Bloomberg forecast initial jobless claims rose 225,000 in the week ending Feb. 14, slightly down from the prior 227,000.

Money markets have shaved wagers on Fed rate cuts this week, assigning around a 25% chance of a third reduction this year, down from 50% on Friday. The monetary-policy sensitive two-year Treasury yield rose to 3.47%.

The US will sell $9 billion of new 30-year Treasury Inflation-Protected Securities later in the day. Fed speakers include Michelle Bowman and Neel Kashkari, who are both voters.