On March 25, 2026, U.S. Treasury yields fell sharply as investors responded to reports of potential progress toward ending the Middle East conflict, with U.S. President Donald Trump stating that Washington was 'in negotiations right now' with Iran regarding a ceasefire plan [1]. The 10-year Treasury yield dropped more than 5 basis points to 4.3361% by 5:40 a.m. E.T., while the 2-year Treasury note yield fell about 6 basis points to 3.8730%. The 30-year bond yield decreased by 4 basis points to 4.8999% [1]. These declines partly reversed Tuesday's yield spike, which followed a disappointing $69 billion bond auction that saw the weakest demand since March 2025; at one point, the 2-year yield had risen more than 9 basis points, and the 10-year yield had also increased [1].
The market rally was further supported by a sharp drop in energy prices after reports indicated Iran would allow 'non-hostile' ships to pass through the Strait of Hormuz, a critical shipping channel. Brent crude, the global oil benchmark, fell below $100 a barrel, sliding 6.1% to $98.17, while U.S. West Texas Intermediate dropped 5.7% to $87.07 [1].
Investor sentiment remained cautious, reflecting ongoing concerns about rising inflation and the possibility of a halt to Federal Reserve rate cuts [1]. Later in the day, the Mortgage Bankers Association was expected to release the latest average contract interest rate for 30-year fixed-rate mortgages, which could further influence market direction [1].
Reports from the New York Times suggested the U.S. had sent a 15-point peace plan via Pakistan to Tehran, but Iran denied being in talks over any potential ceasefire agreement [1].
CONCLUSION
The sharp decline in Treasury yields and energy prices signals a positive market reaction to potential ceasefire negotiations between the U.S. and Iran, though investor caution persists amid inflation concerns and uncertainty over Fed rate cuts. The situation remains fluid, with conflicting reports about the status of negotiations and upcoming mortgage rate data likely to influence further market moves.