Yields Climb as Geopolitical Risk Returns

• Geopolitical risk is back in focus after reports of attacks on three vessels in the Strait of Hormuz sent oil prices sharply higher overnight, with Brent crude surging around 5% to USD 75 a barrel and WTI moving in lockstep.
• Yields have been climbing since the Asian session with momentum carrying through the night, with 10-year Treasuries adding over 7bps in the past 24 hours while Gilts and Bunds each closed 5bps higher.
• Beyond the oil shock, two further factors drove the move in yields, a heavy wave of bond supply and a notable jump in consumer inflation expectations in the NY Fed’s June survey.
• RBA Chief Economist Sarah Hunter speaks at 11am this morning at the Australian Conference of Economists, in a session on supply shocks and their implications for monetary policy.
• The FOMC Minutes drop later today, the first release under new Chair Warsh, alongside a USD 39 billion 10-year Treasury reopening keeping the heavy issuance theme in play.