US Treasury yields climb as investors weigh Iran tensions

US Treasury yields extended their advance on Monday, with investors balancing heightened Iran tensions against a week that offers few major economic data points to guide trading.

A senior Iranian official said Tehran has decided to shift its posture to "fully offensive," while President Donald Trump told a Fox News reporter that Iran should surrender. Despite the escalation, market participants appear increasingly desensitized to the back-and-forth.

"I think we're getting to the point where we're a little bit dulled by the overly expressive headlines," said Lou Brien, market strategist at DRW Trading.

The yield on the benchmark 10-year Treasury note rose 3.2 basis points to 4.728%, while the 30-year bond climbed 4.8 basis points to 5.314% — its highest level in nearly two decades. The two-year yield, which tracks interest rate expectations, edged up 0.9 basis points to 4.18%.

The yield curve between two- and 10-year notes stood at a positive 54.7 basis points, a signal that markets still expect economic expansion.

Investors now turn to Wednesday's release of the Federal Reserve's meeting minutes and an auction of 20-year bonds. The minutes may draw particular attention given the bond market's unsettled reaction to Fed Chairman Kevin Warsh's first press conference last month.

"Warsh has not completely rid the market of the idea that he's a Trump guy at the Fed rather than his own guy at the Fed," Brien said.

Fed futures on Monday afternoon priced a 32.6% chance of an interest rate hike next month.

A New York Fed survey released Monday showed manufacturing activity in New York state jumped to its highest reading in more than four years.

Inflation expectations remained stable, with the five-year TIPS breakeven rate at 2.255% and the 10-year breakeven at 2.284%.