US 10-Year Treasury Yield Hits 4.75% for First Time Since January 2025 as US-Iran Conflict Lifts Oil Prices

The U.S. 10-year Treasury yield climbed to 4.75% on August 31, its highest level since January 2025, as fresh military escalation between the United States and Iran pushed oil prices sharply higher and stoked expectations that the Federal Reserve could raise interest rates further. The five-year yield also reached its highest point since early 2025, touching 4.5%, while long-dated yields broadly edged up. The German 10-year Bund yield simultaneously hit a 15-year high, reflecting a global selloff in sovereign debt.

Analysts noted that the move in U.S. yields was driven primarily by TIPS, the inflation-protected securities, rather than by a significant shift in breakeven inflation rates. The 10-year breakeven was little changed and 30-year breakevens were similarly steady, leading Bloomberg to conclude that markets were pricing in some combination of greater Treasury supply, reduced demand for U.S. debt, or expectations of faster economic growth rather than a straightforward inflation shock. Oil benchmarks rose more than 3% to session highs after President Trump threatened Iran with additional attacks.

Despite the intraday surge in yields, Treasury Secretary Scott Bessent noted that the U.S. bond market was the best-performing asset in the month of August, offering a counterpoint to the day's selloff narrative.