Treasury yields move higher as Middle East peace talks falter

Yields on U.S. Treasurys moved higher at the start of a new trading week as traders reacted to geopolitical developments around the Iran war ahead of President Donald Trump‘s meeting with China premier Xi Jinping in Beijing later this week, and prepared for the latest inflation reading out Tuesday.

The yield on the 10-year U.S. Treasury note — the key benchmark for government borrowing — was more than a basis point higher, at 4.378%.

The 2-year Treasury note yield, more sensitive to short-term Federal Reserve interest rate policy, rose almost 2 basis points to reach 3.912%. The longer-dated 30-year Treasury bond yield was more than 1 basis point higher at 4.959%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

The war in Iran grew darker on Monday amid signs that any peace agreement — which lifted markets last week— could be stalling. President Trump blasted Iran’s counterproposal to end the 10-week conflict as “totally unacceptable”, while Iranian President Masoud Pezeshkian said his country would “never bow” to its enemies.

Oil prices edged back up toward $100 a barrel in early trading Monday, with West Texas Intermediate futures last up nearly 2%, close to $97 per barrel.

This week’s April consumer price index report due out Tuesday at 8:30 a.m. ET will be key. Non-seasonally adjusted year-over-year inflation is set to rose to 3.7% from 3.3% in March, according to economists polled by FactSet. Excluding volatile food and energy prices, inflation is estimated to rise to 2.7% in April from 2.6% the month before.

Either way, consumer prices are rising far in excess of the Federal Reserve’s stated target of no more than 2% growth in retail inflation.

The jobs market outperformed expectations in April, with nonfarm payrolls reported on Friday to have risen 115,000, down from 185,000 in March but far above the 55,000 forecast by economists surveyed by Dow Jones. Unemployment held steady at 4.3%.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said the jobs picture has “been stable without being good.” He told CNBC that there is “not a lot of evidence that the job market is falling apart,” but he conceded that the hiring rate remains low.