US treasuries rally as Donald Trump hints progress in Iran-US peace negotiations

The United States Treasuries (US government bonds) surged across the curve as cash trading resumed after the Memorial Day break, with investors growing more optimistic about a potential US-Iran deal.The yield on the US government note with a two-year maturity decreased by six basis points to 4.06%, while the yield on the note with a ten-year maturity decreased by six basis points to 4.50%. Thirty-year rates dropped to 5.03%, a four-basis-point decrease.

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Brent crude fell below $100 per barrel after President Donald Trump stated on Monday that talks with Iran to reach a temporary agreement to prolong their ceasefire and reopen the Strait of Hormuz were “proceeding nicely.”However, as per a Bloomberg report, a few hours after this remark, several Iranian vessels were reportedly hit by US and Israeli aircraft in the Strait of Hormuz, underscoring the precarious nature of the current ceasefire.

Compared to December at the end of last week, overnight-indexed swaps have fully priced in a Federal Reserve interest rate increase by March 2027.

As some of the market’s more hawkish Fed predictions subsided, the extra yield investors want to hold on 30-year bonds over five-year notes rose to the highest level since May 2025.