U.S. Treasury yields moved lower on Monday after officials disclosed a preliminary agreement intended to end the conflict between the U.S. and Iran. The development prompted a decline across the yield curve as investors adjusted positions for reduced geopolitical risk.
The yield on 10-year Treasury notes slipped to 4.4197%, its lowest level since May 12. Later in the session the 10-year stood at 4.443%, leaving it down 4.2 basis points for the day. Shorter-dated notes also fell, with the two-year U.S. Treasury yield decreasing by 5.4 basis points to 4.031% - a move that typically reflects shifts in expectations for Federal Reserve interest rate decisions.
Political remarks accompanying the announcement underscored the change in the security backdrop. President Donald Trump said the Strait of Hormuz would reopen on Friday and that he had ordered an end to the U.S. blockade on Iranian ports. The strait is a significant maritime chokepoint, typically handling one-fifth of global oil and gas flows.
Energy markets reacted to the news as well. West Texas Intermediate (WTI) crude, the U.S. benchmark, dropped more than 5% to trade just above $80 per barrel, its weakest level since early March. Despite the decline, oil prices remained elevated relative to pre-war levels, which were around $65 per barrel.
Market attention is also focused on monetary policy. The Federal Open Market Committee will hold its first meeting under new Chair Kevin Warsh on Wednesday. Current market expectations point to the Fed keeping interest rates unchanged at that meeting, a dynamic reflected in movements in shorter-maturity yields.
Overall, the combination of the preliminary agreement to end hostilities and accompanying statements about maritime access contributed to declines in both sovereign yields and oil prices as markets repriced risk and demand expectations.