US Treasury yields fall after Memorial Day holiday

U.S. Treasury yields fell on Tuesday as bond markets returned from their Memorial Day break on hopes of a Middle East peace deal, even as the U.S. military carried out a new attack on Iran.

yield of 10 years US Treasury The note, a key benchmark for U.S. government borrowing, fell more than 7 basis points to 4.496%.

of 2 years treasury Bond yields, which are more closely tied to the Federal Reserve’s short-term interest rate policy, fell more than 7 basis points to 4.049%. longer date 30 year treasury Bond yields also fell by more than 5 basis points to 5.031%.

One basis point equals 0.01%, and yields and prices move in opposite directions.

Yields fell across the board, catching up with the sharp decline in European sovereign yields seen on Monday.

This came after U.S. forces carried out an attack in southern Iran early Tuesday that Central Command described as “self-defense.” Secretary of State Marco Rubio, who is in India, said the Strait of Hormuz would eventually have to be opened “in some way.”

Iran’s Islamic Revolutionary Guard Corps said Tuesday it would retaliate for ongoing ceasefire violations after it identified and engaged a U.S. drone and an F-35 fighter jet that entered its airspace.

The apparent escalation of hostilities comes despite President Donald Trump’s previous posting on Truth Social suggesting that negotiations were “progressing well” and a peace deal could be on the horizon.

Looking ahead, investors will be watching a number of economic data released later this week, including the April value of the Consumer Expenditure Price Index, the Fed’s preferred inflation measure.

Economists polled by Dow Jones expect headline PCE to rise 3.8% from a year ago and 0.5% from March.

U.S. consumer confidence fell in May as the impact of inflation stemming from the Middle East conflict “intensified,” according to the Conference Board.

—CNBC’s Lim Hui Jie and Hugh Leask also contributed to this report.