Iran withdraws from negotiations, triggering US Treasuries sell-off as a primary market issuance boom adds fuel to the fire

⑴ After the United States and Iran accused each other of taking aggressive measures during three months of ongoing negotiations and conflict over the weekend, the rebound in U.S. Treasury bonds from their Tokyo lows continued into the U.S. trading session. When the Chicago Mercantile Exchange opened, commodity trading advisors became buyers. Traders revealed that part of the buying was related to passive index-tracking purchases conducted for monthly index rebalancing. ⑵ However, as a number of investment-grade corporate bond issuance announcements emerged, interest payment/selling behavior linked to rate lock-ins abruptly halted the buying. ⑶ Afterwards, according to reports from Iran's Tasnim News Agency citing sources, in protest against Israel's attacks on Lebanon, Iran's negotiation team has stopped exchanging information with the United States through intermediaries. Affected by this news, U.S. Treasury prices dropped significantly. ⑷ Iran's suspension of the negotiations signals a severe setback for diplomatic efforts. Previous expectations for an extended ceasefire in the market were shaken, and risk-averse sentiment intensified rapidly. ⑸ Looking forward, the focus will be on how the U.S. will respond to Iran's protest actions and whether the situation in the Middle East will escalate further. These two factors will dominate the direction of U.S. Treasury yields in the short term.