The renewal of hostilities between Americans and Iranians in the Strait of Hormuz is causing a widespread rise in sovereign yields across several markets, with investors fearing greater inflationary pressure and new increases in key interest rates in the major Western economies. Jim Reid, Director of Macro Research at Deutsche Bank, pointed out that the main driver was the escalation in the Middle East over the weekend, when the US and Iran exchanged fire for the first time since late July.
Japanese bonds hit 30-year highs as they reached 3% in ten-year maturities, while British ten-year gilts surged to 5.258%, the highest level since June 2008. In the US, ten-year Treasury bonds touched 20-month highs as they rose to 4.798%, and German ten-year bunds reached a new one-year high at 3.369%. Portuguese 20-year bonds approached near-decade highs, rising to 4.269%.
International oil prices reacted immediately to the tensions, deepening investors' fears regarding an inflation that continues to show no signs of improvement. In the eurozone, the price indicator touched new highs since the start of the conflict, reaching 3.3%. Peter Schaffrik, strategist at RBC Capital Markets, classified the situation as "a global story".
The ECB also warned about the risks created by the wave of investment in artificial intelligence, noting that the growing financing needs of North American hyperscalers are leading to more euro-denominated debt issuance, already representing almost 10% of all single-currency debt issued by non-financial entities. The central bank warned that this could be the beginning of an unprecedented financing wave that could reshape bond markets in the eurozone.
