Insights 
VT 
U.S. Yields Climb Amid Geopolitical Tensions
U.S. yields registered gains: the 2-year yield at 3.952% with a 4.6 basis point increase, 5-year at 4.008% with a 4.9 basis point increase, 10-year at 4.408% with a 5.2 basis point increase, and 30-year at 4.901% with a 5.9 basis point increase. Despite initial gains, the U.S. dollar eased back slightly, although it closed higher against all major currencies.
For the day, the dollar gained: EUR 0.38%, GBP 0.39%, JPY 0.39%, CHF 0.15%, CAD 0.06%, AUD 0.72%, and NZD 0.96%.
U.S. stocks dropped, impacting weekly performance: Dow fell by 1.79% for the day and 1.32% for the week, S&P by 1.13% and 0.39%, and NASDAQ by 1.30% and 0.63%. Geopolitical tensions and central bank decisions are likely to keep markets volatile. Central banks like the Federal Reserve and Bank of Japan will announce policy decisions soon. Economic data from the U.S., Australia, and the UK will also offer insights into global growth trends.
Market Volatility and Economic Impact
The previous material explains how heightened geopolitical risk—specifically, a military move from Israel toward Iran—sparked an uptick in the U.S. dollar. That kind of response isn’t unusual. When uncertainty rises, investors tend to seek safer places to park funds, and the greenback tends to benefit from that shift. But what caught many off guard was the reaction in U.S. government bond yields. Rather than falling, which is more commonly expected during such periods, yields took a leg higher.
The movement in yields appears tethered both to inflation concerns and technical levels. Bond markets often react not just to events on the ground but also to price thresholds that traders watch closely. We saw the 2-year note move up after hovering near 4%, the 10-year climbing past 4.5%, and the 30-year brushing close to 5%. When those levels give way, price action tends to accelerate.
What’s different in this environment is the pairing of geopolitical stress with anxiety about inflation. With oil prices vulnerable to further upside due to Middle East instability, traders seem unsettled by the potential for upward pressure on energy prices, which would complicate the disinflation process. As a result, higher yields reflect a market that’s recalculating the outlook for central bank behaviour, not just reacting to regional conflict.
The dollar, while initially sharply stronger, gave a bit back before the close—but ended higher across the board. Gains were most pronounced against commodity-linked and high-beta currencies like the New Zealand and Australian dollars. Those currencies are more sensitive to both risk sentiment and global trade shifts. Sterling and the euro also gave ground, albeit to a lesser extent, with the yen continuing its recent soft patch.
