Treasury yields fall as traders weigh odds of Iran war ending, future Fed policy moves
U.S. Treasury yields edged lower on Tuesday morning, as investors continued to monitor developments in the Middle East.
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Traders work on the floor at the New York Stock Exchange (NYSE) in New York, US, on Friday, March 27, 2026.
Michael Nagle | Bloomberg | Getty Images
U.S. Treasury yields edged lower on Tuesday as investors assessed the likelihood of the conflict in the Middle East reaching a resolution as well as the outlook for the Federal Reserve's interest rate path.
The yield on the 10-year Treasury fell more than 4 basis points to 4.301%. The 2-year yield dropped more than 4 basis points to 3.781%, while the 30-year Treasury yield was down more than 2 basis points to 4.883%.
One basis point is equal to 0.01%, and yields and prices move in opposite directions.
The U.S.-Iran war continues to hold the attention of investors across the globe, and yields continued to slip after an unconfirmed report that the Iranian president was prepared to end the war with guarantees.
Elevated oil prices are fueling both inflation concerns and recessionary fears, thereby clouding the outlook for monetary policy trajectories.
Money markets are now overwhelmingly pricing in zero rate cuts from the Federal Reserve for the rest of the year, according to the CME's FedWatch tool. Last week, futures traders briefly pushed the probability of a rate increase by the end of 2026 to 52%.
Federal Reserve Chair Jerome Powell said Monday that he sees inflation expectations as grounded despite rising energy prices so the central bank doesn't need to respond with higher interest rates.
The Wall Street Journal reported on Monday evening that Trump told aides he was willing to end U.S. military hostilities against Iran even if the Strait of Hormuz remained largely closed.
The waterway, a critical shipping route, has essentially been closed for the duration of the conflict, causing a supply glut in the oil market that has sent prices skyrocketing. The New York Post reported the president said he believes the Iran war will likely end soon, with other nations taking the lead in reopening the Strait of Hormuz.
Meanwhile, U.S. Secretary of State Marco Rubio told Al Jazeera in an interview published Monday that Washington's objectives in Iran would take "weeks, not months" to achieve.
