U.S. Treasury yields climbed Tuesday as investors digested news that U.S.-Iran peace negotiations hit an impasse over the weekend.
The 10-year note yield rose more than 2 basis points to 4.356%, extending a selloff that began Monday following a military exchange near the Strait of Hormuz.
The stalled diplomacy is keeping risk premiums elevated across sovereign debt and energy markets.
With de-escalation off the table, bond traders are repricing the probability of prolonged regional friction, which continues to support higher term premiums and upward pressure on the curve.
Traders will look for any late-week diplomatic statements or follow-through in the 2-year and 10-year curves to gauge whether the geopolitical shock is being absorbed or if further repricing is warranted.
Oil prices remain a key barometer for how the market is pricing the ongoing standoff.