26-03-2026      from：www.fxcg.com   author: FXCG

Boosted by the improving diplomatic prospects in the Middle East, US Treasury bond prices rose significantly, while international oil prices fell simultaneously. This trend also drove up most major government bond markets around the world.
On Wednesday, the White House stated that peace negotiations with Iran were still ongoing. Affected by this news, yields on US Treasury bonds of all maturities generally fell by 2 to 4 basis points. Despite Tehran’s rejection of a ceasefire proposal and weak demand in the second of three long-term Treasury auctions this week (the five-year Treasury auction), the gains in US Treasury bond prices were basically maintained. At the same time, US benchmark crude oil prices also narrowed their losses sharply, having fallen by more than 6% at one point before narrowing to less than 2%.
Since the United States launched an attack on Iran on February 28, the trend of US Treasury bond yields has been affected by oil price fluctuations. At that time, oil supply in the Middle East was restricted due to tense situations, leading to a surge in oil prices, which in turn pushed up US gasoline prices—a key component of US inflation indicators. After inflation expectations heated up, market expectations for the Federal Reserve to cut interest rates this year were completely dashed, and even began to pave the way for the Federal Reserve to raise interest rates. Since the beginning of this month, occasional single-day declines in oil prices (such as the decline on Wednesday this week) have provided favorable support to the US Treasury bond market.
Molly Brooks, interest rate strategist at TD Securities, said: “From the performance of the futures market, we still expect the Federal Reserve to raise interest rates this year. Currently, the market seems to be in a wait-and-see state, waiting for the US and Iran to reach a relevant agreement before gradually incorporating interest rate hike expectations into consideration.”

Weak Performance in Five-Year Treasury Auction

Similar to the two-year Treasury auction on Tuesday, the yield of this $70 billion five-year Treasury auction was higher than expected, indicating low investor interest in this maturity of Treasury bonds. However, compared with the two-year Treasury bonds, the overall performance of the five-year Treasury bonds was better, and the current overall market sentiment remained optimistic.
Boosted by market expectations of easing tensions in the Middle East, European government bond prices also rose simultaneously. Among them, the two-year German Treasury bond yield once fell by 10 basis points to 2.57%; the UK Treasury bond yield also fell by 11 basis points to 4.36% at one point. In addition, the US Treasury Department plans to issue $44 billion in seven-year Treasury bonds on Thursday.
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