US Treasury futures declined on Tuesday but recovered significantly from their daily lows. This movement followed remarks by former US President Donald Trump, who stated that the US would provide insurance guarantees and naval escorts for oil tankers and other vessels transiting the Strait of Hormuz, which helped stabilize oil prices. Equities also pared some of their losses, while breakeven inflation rates gave up their rapid early gains as inflation expectations steadied. Large sell orders during the US afternoon session continued to push SOFR spreads toward a flatter trajectory. Dollar swap spreads tightened initially but later reversed those moves.

Shortly after 3:00 PM New York time, Treasury yields were up across the curve by 2 to 3 basis points, after having risen by 7 to 12 basis points earlier in the session.

The 10-year yield was around 4.055%, below its intraday high of 4.115%. Dollar swap spreads moved away from session lows, although the entire curve remained slightly narrower.

WTI futures remained up about 3% in after-hours trading and continued to influence market sentiment. Trump's comments appeared to stabilize oil prices, lift equity markets, and pull breakeven inflation rates lower from their earlier highs. The S&P 500 index was still down about 0.9% for the day.

SOFR spreads remained near cycle lows across several tenors. As traders continued to scale back expectations for interest rate cuts in the coming months, the SOFR 12-month curve (Dec 2026/Dec 2027) touched an intraday low of -15 basis points.

Trading volume in SOFR and federal funds rate futures remained elevated on Tuesday. As of 3:30 PM New York time, volume in most tenors was roughly double the average daily level.

As of 3:15 PM New York time: - The 2-year Treasury yield was 3.4937%; - The 5-year Treasury yield was 3.6277%; - The 10-year Treasury yield was 4.0517%; - The 30-year Treasury yield was 4.699%; - The spread between 5-year and 30-year Treasury yields was 106.97 basis points; - The spread between 2-year and 10-year Treasury yields was 55.59 basis points.