U.S. 2-year Treasury yield rises as oil tops $100 a barrel

The yield on the U.S. 2-year Treasury note yield rose on Wednesday as oil prices hovered above the $100 mark and inflation fears continued to mount.

The 2-year yield — typically more sensitive to near-term policy expectations — was trading up more than 2 basis points at 4.423%.

The yield on the benchmark 10-year Treasury note was up less than 1 basis point at 4.808%, while the 30-year Treasury bond yield was more than 1 basis point lower at 5.251%.

One basis point equals 0.01%. Bond prices move inversely to yields.

Wednesday morning saw international benchmark Brent crude futures rise above the $100-per-barrel mark for the first time since late July. U.S. West Texas Intermediate futures also extended gains on Wednesday, adding more than 2% to trade at around $95 a barrel.

The ongoing rally comes amid escalating tensions in the Middle East, with conflict continuing between the U.S. and Iran. Tehran said Wednesday its forces had struck two American vessels and eight oil tankers in the Gulf in retaliation for the U.S. destroying five Iranian crude oil tankers.

“Rates and FX markets are facing an ever more complex environment, with the risks of high energy prices spilling over more broadly in inflation terms, but in turn also increasing the risks of growing headwinds to growth, and demand destruction,” Marc Ostwald chief economist and global strategist at London’s ADM Investor Services, said in a Wednesday note.

Investors are awaiting a series of economic data prints this week for clues on how the U.S. economy is holding up as the war and energy supply constraints drag on. August producer price index data is due Thursday, while the consumer price index reading for that month will be released on Friday.