The US Treasury Department building in Washington. Photo by Stefani Reynolds /Bloomberg

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(Bloomberg) — Treasuries fell as oil prices surged on signs of renewed threats to Middle East supply and Amazon.com led the corporate new-issue with an offering expected to raise at least $25 billion.

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Yields rose about seven basis points across maturities, pushing the 10-year note to the highest level in nearly a month, as the jump in energy prices fueled demand for other havens. 

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Renewed warfare in the Strait of Hormuz lifted US benchmark West Texas Intermediate crude oil futures as much as 5.8% Tuesday. The move accelerated after the US responded by revoking a waiver that allowed the sale of Iranian oil.

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The 30-year bond’s yield closed above 5% for the first time since early June, while the dollar edged higher. 

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Yields also faced upward pressure from corporate bond supply, particularly after Amazon’s eight-part sale was announced, including 10-, 20-, 30- and 40-year tenors.

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“We don’t think there’s a single smoking gun behind the move, but rather several different catalysts — all of which have leaned in the bearish direction,” said Izaac Brook, an interest-rate strategist at RBC Capital Markets. 

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In addition to oil prices and supply from the Treasury and corporate markets, they include rising European bond yields and NATO allies’ commitment to at least $50 billion in defense spending. The 4.5% and 5% thresholds are key for 10- and 30-year Treasuries, and there appears to be “less willingness to defend those levels from a tactical perspective,” Brook said.

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A Bloomberg gauge of the dollar gained Tuesday while the yen outperformed its Group-of-10 peers. The moves reflected risk-aversion stemming from the attacks in the Strait of Hormuz, said Andrew Hazlett, a foreign-exchange trader at Monex Inc. 

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“That geopolitical risk also drives some haven demand for the dollar,” he said.

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The Amazon offering — the latest in a series of jumbo bond sales by massive cloud computing firms — took the corporate bond market by surprise, insofar as dealer forecasts for volume this week were in the $20 billion to $25 billion range, and about $12 billion was sold Monday.

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The rise in Treasury yields bolstered demand for an auction of three-year notes, the first of the US government’s seven major longer-term debt sales in July. The $58 billion auction drew 4.179%, lower than its 4.185% yield in pre-auction trading at 1 p.m. New York time, the bidding deadline, indicating that buyers were willing to accept a lower yield than was anticipated.

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Also, bidder-participation data for the auction showed that primary dealers — a group of 26 banks whose participation is required — were awarded 7.7%, a record low for the tenor indicative of strong bidding by investors.

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Auctions of 10-year notes and 30-year bonds are scheduled for Wednesday and Thursday. The 10-year trades around 4.55%. Last month’s sale of the tenor drew 4.538%.

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“Supply concessions end up being a buying opportunity, especially around clean numbers like 4.5% and 5%” for the 10- and 30-year tenors, said George Goncalves, head of US macro strategy at MUFG.

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—With assistance from Michael MacKenzie, Carter Johnson and Anya Andrianova.

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(Updates yield levels and oil price gain.)

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