U.S. Treasury yields were down sharply Wednesday following the announcement of a two-week ceasefire in the Middle East conflict.
The yield on the 10-year U.S. Treasury note — the benchmark for government borrowing — dropped around 4 basis points to 4.301%.
Shorter- and longer-dated yields also declined as investors piled into U.S. bonds. The yield on the 2-year Treasury note, which more closely follows short-term Federal Reserve rate moves, was down 4 basis points at 3.79%. The 30-year Treasury note yield dropped 3 basis points to 4.891%.
One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.
The slide in borrowing costs come as concerns over inflationary pressures created by the five-week conflict ease.
Energy prices rapidly reversed course following the suspension of hostilities. Under the terms of the agreement, President Donald Trump has agreed to halt attacks on Iranian infrastructure, while Tehran will allow the safe passage of ships through the critical Strait of Hormuz waterway "via coordination with Iran's Armed Forces," Foreign Minister Abbas Araghchi said in a statement.
Uncertainty lingers around passage through the Strait of Hormuz. On Wednesday, Iranian state news agency Fars said that oil tanker traffic through the strait has ceased following an Israeli attack on Lebanon. Iran's parliamentary speaker Mohammad Bagher Ghalibaf also said the U.S. has already violated its two-week ceasefire agreement.
West Texas Intermediate crude futures tumbled more than 16% to close at $94.41 per barrel, its biggest daily drop since April 2020. International benchmark Brent for June delivery lost about 13% to settle at $94.75.
Traders are also considering the likelihood of an interest rate cut by the end of the year following the ceasefire agreement, with odds for a reduction jumping to above 43% from 14% on Wednesday morning, according to the CME Group's FedWatch tool.
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