US Bonds Steady as Traders Bet War Uncertainty Keeps Fed on Hold

Treasuries market holds steady ahead of Trump's Iran deadline extension

Apr. 7, 2026 at 4:30pm

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An extreme close-up of heavy, industrial banking machinery and equipment in shades of steel gray, silver, and black, conceptually representing the cautious, uncertain state of the US government bond market amid geopolitical turmoil.As geopolitical tensions continue to roil financial markets, the US government bond trading floor remains a nerve center of uncertainty and caution.Washington Today

Bond traders are betting the Federal Reserve will keep interest rates on hold for the coming year, with the Treasuries market holding steady as uncertainty continues around the US-Iran conflict and its impact on oil supply and inflation. Traders have wiped out expectations for Fed rate cuts this year after strong US jobs data, but remain cautious about making strong wagers in either direction amid the geopolitical tensions.

Why it matters

The US government debt market is closely watching geopolitical developments, as disruptions to oil supply from the Iran-US conflict have been a major driver for bond investors, who are considering both the growth and inflation risks posed by a surge in energy prices. The market's expectations for Fed policy will have significant implications for interest rates and borrowing costs across the economy.

The details

Interest-rate swaps showed traders wiped out what little remained of their wagers on Fed easing after unexpectedly strong US labor market data were released on Friday. That view prevailed as trading resumed Monday, keeping the yield on policy-sensitive two-year Treasuries around 3.86% and the 10-year yield at about 4.34%. The dollar slid. The only major economic release on Monday, the ISM report on services activity, had limited market impact as its overall gauge and an employment measure declined more than economists estimated, while indexes for prices and new orders exceeded estimates.

  • President Donald Trump extended his deadline to Tuesday for Iran to reopen the Strait of Hormuz.
  • Trump is slated to speak at 1 p.m. in Washington on Monday.

The players

Ian Lyngen

Head of US rates strategy at BMO Capital Markets.

Gregory Faranello

Head of US rates at Amerivet Securities.

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What they’re saying

“The uncertainties created by the war in Iran continue to overshadow the fundamentals.”

— Ian Lyngen, Head of US rates strategy

“There is no hard definitive conclusion here geopolitically. But if we make progress and energy prices come down, we expect rates to follow. In conjunction we also have US Treasury supply. So, we likely chop around over the next few days.”

— Gregory Faranello, Head of US rates

What’s next

Trump is slated to speak at 1 p.m. in Washington on Monday, which could provide further clarity on the Iran situation and its potential impact on the bond market.

The takeaway

The US government bond market remains highly sensitive to geopolitical developments, particularly the ongoing tensions between the US and Iran and the potential disruptions to global oil supply. Traders are treading cautiously, unwilling to make strong bets on the direction of interest rates until there is more certainty around the path of the conflict and its economic implications.