Treasury yields are little changed as investors remain optimistic on Iran peace deal prospects despite U.S. strikes

Treasury yields were relatively unchanged on Wednesday as investor optimism over a potential settlement to the war in Iran was undented by pressure on the fragile ceasefire between Washington and Tehran. 

The yield on the 10-year U.S. Treasury note — the key benchmark for U.S. government borrowing — fell 1 basis point to 4.481%.

The 2-year Treasury note yield, which more closely tracks short-term Federal Reserve interest rate policy, dropped less than 1 basis point to 4.047%. The longer-dated 30-year Treasury bond yield fell more than 1 basis point to 5.014%. 

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

U.S. forces carried out what the Pentagon described as "self-defense" strikes in southern Iran early Tuesday, targeting missile launch sites and Iranian vessels allegedly attempting to deploy mines, even as Washington insisted it was still observing restraint under the ongoing ceasefire framework.

In response, Iran's foreign ministry accused the U.S. of a "gross violation" of the terms of the ceasefire.

Oil prices fell Wednesday as traders hoped for progress on peace negotiations between the U.S. and Iran. Brent crude futures were last seen down 2% at around $97 per barrel, while U.S. West Texas Intermediate crude futures lost 3% to around $90 a barrel.

Meanwhile, global sovereign bond markets broadly rallied on Wednesday. U.K gilts extended a relief rally that began on Friday as investor concerns about domestic political developments began to ease.

U.K. gilt yields had spiked to multi-decade highs in recent weeks after a set of disastrous nationwide local election results for the governing Labour Party put Prime Minister Keir Starmer's premiership under pressure.