On March 23, 2026, yields on U.S. Treasury bonds surged, with the benchmark 10-year Treasury yield rising by more than 4 basis points to 4.435%, marking its highest level since July 2025. The 30-year Treasury bond yield increased just under 1 basis point to 4.966%, while the 2-year Treasury note yield jumped by more than 10 basis points to 3.997% [1]. This sharp move followed a drastic repricing of Federal Reserve rate cut expectations last week and was further fueled by escalating geopolitical tensions stemming from the intensification of the Iran war over the weekend [1].
Bradley Saunders, North America economist at Capital Economics, noted that despite heightened geopolitical risk, U.S. Treasurys have not benefited from safe haven demand as expected. Instead, the main driver for yields has been shifting Fed rate expectations, with investors focusing on the implications of the Iran conflict for oil prices and the Fed's ability to continue cutting rates [1]. Since the war began, the 10-year yield has risen, reflecting these concerns.
Market participants are also awaiting the S&P Global Flash U.S. PMI report, scheduled for Tuesday morning, which will provide insight into the health of American manufacturing and services sectors. February's PMI report indicated a slowdown in business growth for services firms and employment expansion, and economists expect further softening, with forecasts predicting a reading of 50.5, down from 51.9 in February. A reading above 50 signals growth [1].
The geopolitical situation remains tense, with U.S. President Donald Trump threatening to "obliterate" Iran's power plants if Tehran does not fully reopen the Strait within 48 hours. Iran responded by escalating threats to target energy infrastructure and desalination facilities in the Gulf. Iranian Parliament speaker Mohammad Bagher Ghalibaf stated that entities purchasing American government bonds and "financing the U.S. military budget" would be considered legitimate targets, alongside military bases [1]. Ben Emons, CIO and founder of Fed Watch Advisors, warned that risk-off sentiment could worsen substantially this week, potentially leading to portfolio de-risking and making cash a viable asset again [1].
CONCLUSION
The surge in Treasury yields reflects heightened geopolitical tensions and shifting Fed rate expectations, with investors closely monitoring upcoming economic data for further signs of weakness. The market impact is high, as risk-off sentiment and threats to U.S. assets could drive continued volatility and portfolio adjustments.