Bond Sell Off as Traders Focus on Inflation Risk. This Is the Next Wild Card.

Rather than buying up the world's safest debt in times of conflict, bond investors are selling it as they seem almost entirely focused on the possibility of inflation reigniting.

Prices of U.S. debt were down across the board as Treasury yields rose Monday morning. Yields move in the opposite direction of bond prices.

This isn't a typical move. Investors should have rushed to buy U.S. debt as Israel's attack on Iran threatens a broader conflict, but given the possibility of inflation reigniting from oil becoming more expensive, traders are demanding more yield. The selloff in bonds in especially striking as investors saw strong reception for both the 10-year and 30-year auctions last week. Strong demand at bond auctions typically raises bond prices.