Bond Yields Rise as Traders React to Oil Prices and Debt Levels

U.S. 2 percent on Tuesday, its highest level since 2007. Bond prices fell as traders responded to higher oil prices and concerns over government debt levels. Bond traders linked the move to oil supply disruptions from the war that began nearly three months ago.

President Donald Trump has stated several times that the war is close to ending, though bond markets continued to sell off even after his Monday announcement that an attack on Iran was being called off.

The S&P 500 fell for its third straight session.

Stock and commodity markets reacted to the announcement, while bond markets showed continued selling. Investors noted that higher yields increase borrowing costs for governments and consumers. Mortgage rates, auto loans, and credit card rates are tied to the 10-year Treasury yield.

Ajay Rajadhyaksha, global chairman of research at Barclays, said the developed world has too much debt, too little fiscal discipline, and no political appetite for fixing either. Daniel Alpert, managing partner at Westwood Capital, said the bond market is reacting to uncertainty created by oil prices.

Higher yields raise the cost of financing national debt, which can reduce funds available for other government spending. The combination of higher oil prices and debt levels has contributed to the current bond market movement.