On Tuesday, the yield on the US 10-year Treasury note dropped to 4.48%. This decline was influenced by progress in US-Iran peace talks, which included Washington granting Tehran a 60-day license to sell oil internationally. This development eased oil prices and inflation concerns. Additionally, a sell-off in tech stocks led to a flight to safety, providing further support for the bond market.
Despite these developments, the Federal Reserve's hawkish stance last week has increased investor bets on further rate hikes this year. Currently, markets are pricing in a 68% probability of a rate increase in September, a significant jump from 29% the previous week. The upcoming PCE inflation report, which is the Fed's preferred gauge, is highly anticipated this week for further clarity on monetary policy.
However, there were also signs of a more dovish sentiment emerging from some Fed officials. Federal Reserve Governor Michelle Bowman indicated she would favor a July interest-rate cut if inflation remains low, echoing similar comments from Fed Governor Christopher Waller. This has led to some investors beginning to price in a possible July rate cut, although the probability for such a cut remained relatively low at 22.7% as per the CME FedWatch Tool on Monday.
Contrarily, some market participants remain concerned about the potential for renewed US-Iran tensions. Garfield Reynolds, a Markets Live Strategist, commented that the 60 days of US-Iran negotiations could reignite tensions, which would likely drive crude prices higher and consequently increase Treasury yields.
Treasuries had also experienced previous movements based on geopolitical events. On Monday, June 22, 2026, Treasuries fell with 10-year yields about five basis points higher, partly due to the resumption of trading after a US public holiday and a previous sharp jump in European bond yields. Conversely, on June 23, 2025, Treasuries gained as traders sought havens following an Iranian retaliatory attack on a US air base, which caused 10-year Treasury yields to slide to their lowest levels in a month.
