U.S. Treasury bonds declined on Monday, with short-dated notes leading the losses, though the sell-off moderated in the afternoon. Trading was largely influenced by developments in Middle East conflicts. Yields retreated from their session highs after U.S. President Donald Trump stated that negotiations with Iran were proceeding "rapidly" and following an agreement for a ceasefire in Lebanon between Israel and Hezbollah. Earlier, reports of a breakdown in U.S.-Iran peace talks had pushed yields higher alongside oil prices.
Short-term Treasury yields were up 3 to 4 basis points on the day shortly after 3 p.m. New York time, with the 5s30s spread flattening by roughly 2 basis points. The 10-year Treasury yield pared an 8-basis-point gain to about 3 basis points, while the 30-year yield rose more than 2 basis points.
News regarding the U.S.-Iran talks continued to drive movements in oil and equity markets. WTI crude oil futures settled 5.5% higher, having surged as much as 8.5% intraday to surpass last week's peak. The S&P 500 index gained 0.3% in late trading, buoyed by Trump's comments.
Furthermore, active issuance in the investment-grade corporate bond market added upward pressure on Treasury yields. On Monday, 12 companies entered the market, issuing nearly $16 billion in bonds combined, approaching half of dealers' $35 billion forecast for the week.
Overnight index swap (OIS) prices tied to Federal Reserve meeting dates reflected increased rate hike expectations. Pricing implied roughly 20 basis points of tightening by year-end, up from 16 basis points at Friday's close, and about 25 basis points by March 2027.
As of 4:18 p.m. ET, the 2-year Treasury yield was 4.0308%.
The 5-year Treasury yield was 4.1617%.
The 10-year Treasury yield was 4.4492%.
The 30-year Treasury yield was 4.9686%.
The 2-year/10-year Treasury yield spread was 41.64 basis points.
The 5-year/30-year Treasury yield spread was 80.52 basis points.
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