Investors Sell Global Bonds Again as Trump's Speech Fails to Reassure Markets

By Emese Bartha

Investors sold U.S. and European government bonds on Thursday, pushing yields higher as the recent optimism for a swift resolution to the Middle East war dissipated after U.S. President Trump's speech to the nation on Wednesday.

Trump's speech failed to reassure markets as his message was mixed. Trump claimed the war was "very close" to completion, but he also pledged to hit Iran "extremely hard" over the next two to three weeks. Meanwhile, Iran continued to strike Gulf states.

The Strait of Hormuz has remained closed by Iran, putting further upward pressure on oil prices and charting an uncertain path ahead for both inflation and growth.

"Trump's rhetoric does not offer markets a tangible solution," ING's senior U.K. and eurozone rates strategist Michiel Tukker said in a note. This will keep both oil prices and risk aversion raised as Europe enters the long Easter weekend, he said.

The 10-year U.S. Treasury yield jumped 5.7 basis points to 4.377%; the 10-year German Bund yield rose 4.6 basis points to 3.032%; while the 10-year U.K. government-bond yield increased 5.7 basis points to 4.900%, according to Tradeweb data.

Higher oil prices could pave the way for higher inflation globally but also weak growth, a combination known as stagflation. Brent crude oil last traded up 7.3% at $108.51 per barrel.

"Fixed income is offering no shelter, with stagflation risk driving bonds and equities lower in tandem," Pictet Asset Management's chief strategist Luca Paolini said in a note.

Deutsche Bank strategists also pointed to the overnight deterioration of market sentiment after the previous two sessions' sharp rallies, as Trump's much-anticipated address "delivered little to nothing new on potential timelines or conditions for ending hostilities against Iran."

Still, some analysts favor U.S. Treasurys over other major government bonds due to their perceived greater safe-haven status and the fact that the U.S. economy is somewhat shielded from higher energy prices because the country is a net energy exporter. The U.S. dollar rose, with the DXY dollar index up 0.5% at 100.153.

"We continue overweighting U.S. Treasuries versus global bonds," Societe Generale's rates strategists said in a note.

Pictet Asset Management also raised its position on U.S. Treasurys to neutral from underweight within its portfolios. Treasury yields have already risen and the Federal Reserve has a dual mandate to target maximum employment as well as stable prices, Paolini said.

Ahead of the Easter weekend, investors are particularly cautious.

"The fog of war is thick and erring on the side of caution going into the long Easter weekend remains our preferred scenario," KBC Bank analysts said in a note.

"Risks of escalation are high," they said.

Write to Emese Bartha at [e-mail]

(END) Dow Jones Newswires

04-02-26 0540ET