The decline in bond prices and the simultaneous ejecting of their yields on Friday is due to the impressively strong US employment figures, which have drained hopes of reducing interest rates from the Fed by strengthening expectations of a new interest rate increase within 2026.
But when investors expect higher interest rates for a longer period of time or new increases, they sell existing lower yield bonds, resulting in their prices falling and returns – yeelds – go up to align with new market data.
The employment report published yesterday served as a catalyst for the general sell-off on the market, which included not only bonds.
More specifically, the US economy added 172,000 new jobs in May, far exceeding the estimates of analysts who predicted just 80,000–85,000 jobs.
Very important too was that the data of previous months -March and April - were significantly revised upwards. For example, April of 115,000 was revised to 179,000 places.
The unemployment rate remained unchanged at 4.3%, confirming the stability of the labour market, while average hourly earnings increased by 0.3% on a monthly basis.
Thistenstein remain at levels that sustain inflationary concerns.
Immediately after the announcement, the performance of the 10-year American bond was ejected to 4,534% high the market had to see since May 21.
The two-year bond performance. The most sensitive to interest rate changes, he jumped to 4,153%, as traders now invoice 60% to 65% probability of increasing interest rates by 25 basis points from Fed until December 2026.
So the conclusion from the macroeconomic data of the week is that the overall picture of the economy shows that it has not entered a recession orbit and strong domestic demand and consumption in the U.S. continue to provide Fed with «green light» to maintain a restrictive monetary policy.
But the account that good news for the economy is bad news for markets was fully confirmed this week, as the U.S. durable economy means that the cost of money will remain high, pushing down bond prices and now affecting stock markets.
It is noted that the bond market was already under pressure all week, due to a combination of macroeconomic factors and geopolitical risks.
Is Bab el-Madeb a new spot for involvement? The role of the Huthi
The biggest of these risks is that the ongoing geopolitical crisis and blockade of the Straits of Hormuz have now bounded a trading zone for Brent oil consistently over $90/varelli-95/varelli was Friday's price – out of $70/varelli pre-crisis.
The rise in energy costs directly fuel inflation, forcing investors to demand higher returns to protect their funds.
Of course, it seems on the horizon. «light in the tunnel» with President Trump appreciating that a peace agreement is a matter of time.
But at the same time Iran threatens again with full closure of Ormuz after night hostilities, with the Guards of the Revolution threatening to close the Close Babel-Madeb, one of the main points of the trade map linking the Red Sea to the Gulf of Aden and the Arab Sea.
Note that Bab el-Madeb has functioned as critical release valve for the purchase of oil during the closure of the Straits of Hormuz.
Saudi Arabia has redirected millions of barrels from Persian Gulf to Red Sea. These barrels pass from Bab el-Madeb to Asia, which has helped compensate for part of the loss of supply in key economies such as Japan and South Korea.
Indeed, according to data provided by Kpler, oil and product exports through Bab el-Mandeb nearly doubled to 7.2 million barrels daily in April, compared to 3.9 million barrels daily in February, before the US and Israel attack on Iran.
If the Guards of the Revolution proceed to attacks on ships sailing in Bab el-Madeb they would cut off the supply of these barrels, a scenario that would further reduce oil supply in an already disturbed market.
How close are we to this scenario? Rather close enough, as according to the Iranian state news agency Tasnim, already the Iranian Revolution Guards threatened Monday to close Bab el-Madeb if Israel did not stop the raids on Gaza and Lebanon.
Although we had an agreement between Israel and Lebanon on Wednesday to implement a truce, it is not certain that the ceasefire will actually come into force, while Hezbollah's intervention - Iran's ally in Lebanon - which acts independently of the government in Beirut and which rejected the ceasefire agreement Thursday complicates things even more.
So for the analysts, a closure of Bab el-Mandeb from Iran is possible and can re-eject oil prices as oil flow through the Red Sea is just one of the factors that have prevented the prices of the slow from being launched higher.
Furthermore, the truce between the US and Iran remains fragile. Washington and Tehran exchanged fire within and around the Straits of Hormuz the week we passed. If the US escalates military action, Iran's natural response will be to target Bab el-Madeb according to CNBC.
Another big question is the attitude that will be held by Allies Huthi of Iran in Yemen, who have largely been left out of war so far.
We recall that the Huthi had attacked merchant ships in the Red Sea from 2023 to 2025 in retaliation for Israel's Gaza war.
The Trump government waged a 52-day air war against the Huthi, which ended in May 2025 with a cease-fire, in exchange for ending the fighters' attacks on ships with an American flag on the Red Sea.
Σύμφωνα με τον Τζακ Κένεντι, επικεφαλής του τομέα κινδύνου χώρας στη Μέση Ανατολή στην S&P Global Market Intelligence, οι Χούθι μπορεί να περιμένουν να εισέλθουν στην τρέχουσα σύγκρουση μέχρι η ιρανική ηγεσία να αποφασίσει ότι είναι συμφέρον να ανοίξει ένα άλλο μέτωπο.
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