Rates Spark: On Edge, But Risk Perception Calms

2025-06-17 03:20:00 ET

By Padhraic Garvey, CFA & Michiel Tukker

Risk calms and Treasury yields rise as we head close to a big Wednesday

Volatility and credit spreads are on a declining path again. Developments out of the Israel / Iran spat are seen as either contained or manageable, with none of the worst fears for a wider impact materialising, at least not as of yet. US Treasuries broadly discounted as such from the very outset, preferring to home in on the potential inflationary ramifications rather than engaging on a safety play. This can cut both ways, and can manifest into a 'quality' flight. But so far, the market has not been minded to morph this into a flight to bonds. Rather, it's been marked as a higher inflation risk and thus negative for Treasuries. The return of risk-on fits the same mold....

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