US Treasury bond prices closed at their session highs, with yields falling by 8 to 11 basis points, after President Trump called off planned strikes against Iran and stated that an agreement to end the conflict had been reached and would be signed shortly. A drop in oil prices contributed to a steepening of the Treasury yield curve, with gains persisting through the market close. Earlier, a tepid 30-year bond auction had weighed on longer-dated bonds, but Trump's announcement prompted a market reversal.
Shortly after 3:30 p.m. New York time, Treasury yields remained near their daily lows, with the spread between 5-year and 30-year yields widening by about 2 basis points. The yield on the 10-year Treasury note fell 10 basis points to around 4.45%.
Speaking from the White House, Trump stated that the US had "just reached a major settlement regarding the war with Iran, with final documents to be completed in the coming days."
WTI crude oil futures, which were already at daily lows, extended their decline, at one point falling 4.7% from Wednesday's closing price.
A $22 billion 30-year Treasury reopening auction held at 1 p.m. saw weaker-than-expected demand. The awarded yield was about 1.2 basis points above the yield at the time the auction closed, initially pushing longer-term yields higher. Primary dealers were awarded 14.7% of the auction, the highest share since August. The share awarded to indirect bidders fell to 60%, offsetting an increase in the direct bidder share to 25.3%.
In Thursday's trading of Secured Overnight Financing Rate (SOFR) options, significant condor strategy positions emerged, providing protection against both upside and downside risks. One such position bets on a single Federal Reserve rate hike before year-end, a trade that also saw substantial volume on Wednesday.
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