US 10Y Yield Edges Lower on Iran Deal Hopes

The yield on the US 10-year Treasury note eased to around 4.25% on Tuesday, reversing the prior session’s increase as investors assessed the potential for a longer-term peace agreement between the US and Iran that could help temper inflation expectations. Vice President JD Vance is expected to lead the US delegation in Pakistan again, while Tehran is also reportedly sending a team after earlier signals it would not participate in further talks. Oil prices retreated, easing inflation concerns and hawkish expectations on central bank policies. The Federal Reserve is broadly expected to keep its policy rate unchanged this month and remain on hold through 2026. Investors are also focused on Tuesday’s Senate confirmation hearing for Kevin Warsh as the next Fed Chair, with markets viewing him as more dovish than current Chair Jerome Powell, whose term ends in May.

The yield on the US 10-year Treasury note was little changed at around 4.25% on Monday, easing from modest gains in the Asian session and hovering near one-month lows, as investors assessed a renewed setback in peace negotiations. On Sunday, the US said it had seized an Iranian cargo ship that attempted to breach its naval blockade, while Iran vowed to retaliate, heightening fears of a renewed escalation in hostilities. Uncertainty also remains over whether US and Iranian officials will meet ahead of the expiry of a 14-day ceasefire on Tuesday, with Tehran indicating it will not participate in a second round of talks. Meanwhile, oil prices edged higher and persistent inflation concerns continued to anchor borrowing costs at elevated levels. Investors are also looking ahead to Tuesday’s Senate confirmation hearing for Kevin Warsh as the next Fed Chair. He is widely seen as more dovish than current Chair Jerome Powell, whose term is set to expire in May.

The yield on the US 10-year Treasury note rose to around 4.27% on Monday, reversing the prior session’s decline as renewed US-Iran tensions lifted inflation concerns. President Donald Trump said the US Navy fired on and seized an Iranian-flagged cargo vessel in the Gulf of Oman after it ignored warnings to stop while exiting the Strait of Hormuz. Tehran also reversed plans to reopen the strait following Washington’s refusal to lift its blockade on Iranian ports and stated it would not participate in a second round of negotiations. The prolonged conflict has triggered a severe energy supply shock, heightening inflation risks and increasing the likelihood of additional central bank tightening, while further dampening expectations for Federal Reserve rate cuts this year. The Fed is widely expected to keep policy rates unchanged this month and to remain on hold for the rest of 2026.