(Bloomberg) — Treasuries surged on investor optimism that the US and Iran were working toward a deal that could ease a rise in global energy prices that has fanned fears around inflation.
The rally pushed yields lower across maturities on Wednesday after a White House pool report that US President Donald Trump said the US was in the “final stages” with Iran. Benchmark 10-year yields declined 10 basis points to 4.57%, while those on 30-year securities fell to 5.11%.
Hope that negotiations between the US and Iran could lead to an agreement helped relieve some selling pressure in the $31 trillion Treasuries market, which has been tumbling since late February. Investors were also enticed by yield levels that this week reached multiyear highs amid inflation angst tied to a war-driven rise in energy prices.
Even after Wednesday’s moves, yields on 10-year Treasuries remain near their highest levels in about a year, and the 30-year rate is not far off from its highest since 2007.
“I’d love to believe this, but let’s face it: How many times have we heard this before?” said Win Thin, chief economist at Bank of Nassau 1982, after Trump’s remarks.
Trump on Wednesday also said that “we’ll see what happens” with Iran, adding that a deal will be made or “we’re going to do some things that are a little bit nasty, but hopefully that won’t happen,” according to the pool report.
Iran is reviewing the US’s new draft in response to Tehran’s 14-point proposal and is yet to give a response, the semi-official Tasnim news agency reported, citing a source close to the country’s negotiating team.
Traders, meanwhile, eased some of their bets on the Federal Reserve raising interest rates by the end of the year. They still anticipate that the central bank’s next move will be a hike, in contrast to the multiple cuts seen before the US attacked Iran in late February.
The rally trimmed the yield in an auction of 20-year Treasury bonds. The $16 billion auction was awarded at 5.122%, still the second-highest result since the US government resumed selling 20-year bonds in 2020.
While the auction yield was in line with the indicated level at 1 p.m. New York time, the bidding deadline, the new bonds traded at yields as high as 5.21% in pre-auction dealing since the sale was announced last Thursday.
–With assistance from Edward Bolingbroke.
(Updates with levels throughout. An earlier version of this story was corrected to remove the word “talks” from headline and second paragraph.)
More stories like this are available on bloomberg.com
