Bond Sell-Off Deepens as Oil Surge Pressures U.S. Treasuries
U.S. government bonds extended their sell-off on February 19, 2026, marking the longest losing streak in a month as investors reacted to mounting geopolitical risks and renewed inflation concerns.
- 10-year Treasury yield rose to 4.09%, extending the longest bond sell-off in a month.
- U.S.-Iran tensions pushed oil higher, fueling inflation fears.
- Fed signaled rates may stay higher for longer.
- Strong jobless data reduced expectations for near-term rate cuts.
The benchmark 10-year Treasury yield rose for a third straight session, climbing to around 4.09%, reflecting steady pressure on bond prices.
The move higher in yields comes as markets digest a complex mix of geopolitical uncertainty, rising energy prices, and signals from the Federal Reserve that policy could remain tighter for longer than previously expected.
Geopolitical Tensions Push Oil Higher
Escalating tensions between the United States and Iran have rattled global markets. Reports suggest that military intervention could come sooner than anticipated after nuclear talks in Geneva stalled. Vice President JD Vance indicated that Tehran failed to meet key “red lines,” keeping military options open.
Energy markets reacted immediately. Brent crude surged above $71 per barrel, while WTI crude touched levels near $66 – the highest in roughly six months. Analysts warn that any disruption to the Strait of Hormuz, a critical passage handling roughly 20% of global oil shipments, could send crude prices above $100 per barrel. Such a scenario would reignite inflation pressures and complicate the global disinflation trend seen over recent quarters.
Higher oil prices typically translate into higher inflation expectations, which in turn push Treasury yields upward as investors demand greater compensation for holding long-term debt.
Federal Reserve Signals Add Pressure
Adding to the bond market’s weakness, minutes from the January Federal Open Market Committee meeting revealed that policymakers remain concerned about persistent inflation. Officials indicated they are prepared to consider further rate hikes if price pressures do not ease convincingly.
As a result, traders have dialed back expectations for interest rate cuts in 2026. The repricing of rate expectations has supported short- and long-term yields alike.
Stronger economic data has reinforced this view. Weekly initial jobless claims fell to 206,000, underscoring ongoing labor market resilience. This suggests the economy is not cooling rapidly enough to justify immediate monetary easing, further weighing on bonds.
Yield Snapshot – February 19, 2026
- 10-Year Treasury: 4.09% (+1–2 basis points)
- 2-Year Treasury: 3.47% (+1 basis point)
- 30-Year Treasury: 4.72% (+1 basis point)
The rise across maturities signals broad-based selling pressure rather than a move isolated to one part of the curve.
All Eyes on PCE Inflation Data
Investors are now focused on the upcoming Personal Consumption Expenditures (PCE) report, the Federal Reserve’s preferred inflation gauge, due Friday. The data will be critical in determining whether higher energy prices are feeding into broader consumer price pressures.
If the PCE report confirms persistent inflation, yields could climb further as markets reassess the likelihood of rate cuts. Conversely, softer data may offer relief to the bond market after its recent slide.
For now, the combination of geopolitical risk, firm economic data, and a cautious Federal Reserve stance is keeping upward pressure on U.S. yields and testing the bond market’s stability.
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Alexander Zdravkov is a person who always looks for the logic behind things. He has more than 3 years of experience in the crypto space, where he skillfully identifies new trends in the world of digital currencies. Whether providing in-depth analysis or daily reports on all topics, his deep understanding and enthusiasm for what he does make him a valuable member of the team.
