The bond market's attempt to reverse its recent upward trajectory was thwarted on Tuesday as geopolitical risks in the Middle East continued to weigh on sentiment.
Although inflation data from both the United States and the United Kingdom came in softer than expected, the relief rally in fixed income was short-lived, with yields remaining firm and the euro weakening against a broadly stronger dollar.
European and US interest rates had climbed steadily during the morning session, driven by a risk-off environment stemming from the deteriorating situation in the Middle East.
The dollar's strength reflected safe-haven flows, while the euro faced pressure as investors reassessed the risk premium embedded in global assets.
The divergence between the calming inflation data and the persistent geopolitical anxiety created a choppy trading environment, with the latter ultimately dominating market direction.
The softer inflation figures, which had previously removed the threat of a Federal Reserve rate hike and eased concerns about UK price pressures, failed to provide a sustained catalyst for lower yields.