Following Israel’s attack on Iran’s nuclear program, the U.S. Treasury bond market experienced an unexpected selloff on Friday, pushing yields modestly higher.
While investors initially sought the safety of government bonds late Thursday, this “safe-haven” demand quickly reversed.
According to BMO Capital Markets strategists, the shift occurred as traders became more concerned about inflation risks, particularly from rising oil prices.
The market found itself caught between two opposing forces: the typical flight to safety during geopolitical tensions versus worries about renewed inflation.