U.S. Treasuries rise as Iran deal reports lift demand

Benchmark U.S. Treasury yields declined on Tuesday as reports of progress toward a potential Iran nuclear deal boosted demand for safe-haven assets.

The yield on the 10-year Treasury note dropped to 4.12%, its lowest level in nearly two weeks, following unconfirmed reports that negotiations between Iran and global powers were advancing. The 30-year bond yield fell to 4.28%, while the two-year note yield, more sensitive to Federal Reserve policy expectations, eased to 4.54%.

Market participants cited reduced geopolitical risk premiums as the primary driver of the move, with traders scaling back bets on further upside in yields amid the improved diplomatic outlook. The dollar index, which often tracks Treasury yields, also slipped 0.2% to 104.75.

Analysts at Goldman Sachs noted that while the potential easing of tensions could support longer-duration Treasuries, the impact on broader financial markets remained contingent on the final terms of any agreement. "The market is pricing in a lower probability of a near-term escalation," a Goldman strategist said.

The decline in yields follows a recent stretch of volatility driven by mixed economic data and shifting expectations for Federal Reserve rate cuts. Investors are closely watching upcoming U.S. inflation and jobs reports for further clues on monetary policy direction.

Treasury futures implied a 68% chance of a Fed rate cut by September, according to CME Group data, up from 62% a day earlier.