The bond sell-off that’s rattled investors in recent weeks reversed course on Tuesday on hopes that a peace deal to end the Iran war is close.
Bond yields tumbled on Tuesday, a sign that the market is feeling less anxious about inflation and the direction of interest rates as hope grows for a resolution to the Iran war. The hope has been that an end to the conflict will turn oil flows back on in the Persian Gulf, sending crude prices down and dispelling some of the inflationary pressure that has weighed on economic sentiment recently.
The yield on the 10-year US Treasury bond dropped 8 basis points to around 4.48% on Tuesday. The yield is down 19 basis points from its peak last Tuesday.
The 30-year US Treasury, which reached its highest level since before the Great Financial Crisis last week, also dropped 7 basis points to trade around 5.01%, remaining slightly above the critical 5% threshold. The yield is down around 17 basis points from its prior peak.
US stocks ticked higher, continuing their record-setting rally. The Nasdaq 100 rose 1%, driven higher by a fresh rally in memory stocks. The S&P 500 extended gains after it capped off its longest weekly winning streak since 2023 last Friday.
Here’s where US indexes stood shortly around 10 a.m. ET:
The moves on Tuesday were being driven by comments from President Donald Trump, who said on Monday that talks with Iran were “proceeding nicely,” though he warned of continued military action if a deal were to fall through.
“It will only be a Great Deal for all or, no Deal at all — Back to the Battlefront and shooting, but bigger and stronger than ever before — And nobody wants that!,” the president wrote in a post on Truth Social.
Secretary of State Marco Rubio also teased a potential reopening of the Strait of Hormuz on Tuesday, adding that the US and Iran could come to a deal in “a couple of days.”
Oil prices were mixed on Tuesday, but have come down in the past week. Brent crude, the international benchmark, ticked 3% higher, though West Texas Intermediate crude dropped 4% on Tuesday to trade around $92 a barrel.
“In general, we’ve seen a bond rally last several trading days (since May 20th), in tandem with modestly falling oil prices — even as event-driven volatility risks linger,” Robert Embree, a senior economist at Rosenberg Research, wrote on Tuesday.
Markets have optimistic that a resolution to the war is around the corner, but negotiations between the US and Iran are fragile. The US said it conducted strikes in “self-defense” near the Strait of Hormuz on Tuesday.
“The United States committed a gross violation of the ceasefire in the Hormozgan region in the past 48 hours,” Iran’s foreign ministry said in a statement Tuesday morning. “Iran holds the US regime responsible for all the consequences resulting from these aggressive and unjustified actions.”
