U.S. government bond yields retreated on Friday as investors digested news that Iran is reviewing a final proposal aimed at ending a conflict that has persisted for approximately three months. The move came after a sharp run-up in yields earlier in the week.
The 10-year Treasury note yield fell by 3.4 basis points in morning trading to 4.552%. That followed a midweek surge that sent the same benchmark to its highest level since January 2025 on Tuesday.
Longer-dated debt also eased. The 30-year Treasury bond yield was down 3.6 basis points at 5.075%. Earlier in the week it briefly reached 5.197%, the highest reading since July 2007.
Traders pushed back on Friday after reports surfaced that Iran was reviewing a final proposal to end the conflict. Those developments coincided with a pullback in oil prices: Brent crude has declined since Thursday and was trading in a range between $104 and $105 per barrel.
Higher oil prices during the conflict had amplified inflation concerns, contributing to the earlier rise in yields and reinforcing expectations that the Federal Reserve would keep its current policy stance in place. With energy prices easing, some of that near-term pressure on inflation expectations appears to have relaxed.
Shorter-term yields moved modestly. The two-year Treasury note yield was down about one basis point at 4.078% on Friday. The yield curve spread between the two-year and 10-year notes stood at 46.6 basis points.
Overall, the market's reaction reflected a combination of geopolitics and commodity-price moves driving shifts in inflation expectations and, by extension, demand for U.S. Treasuries. The extent to which yields stay lower will depend on further developments in diplomatic talks and on the trajectory of energy prices.