US Treasury bonds finished higher on Tuesday, driven primarily by a continued decline in oil prices. Weakening technology stocks during the US trading session and an unexpected drop in the Conference Board’s consumer confidence index also provided support for the bond market.

The results of the 7-year Treasury note auction showed slightly weaker demand than expected, marking the final coupon-bearing Treasury auction before August 11. Treasuries had already risen ahead of the 1:00 PM Eastern Time bidding deadline. Yields across the curve closed 4 to 5 basis points lower, hitting multi-day lows. With the exception of the 30-year bond, yields on all other maturities further retreated from the year-to-date highs touched last week.

Oil prices fell as the US kept its military actions against Iran in a suspended state, fueling expectations that both sides would soon reach an agreement to end the conflict. WTI crude oil futures dropped 4.1% to $79.26 per barrel, the lowest level since July 16. The decline in oil prices weakened market bets that the Federal Reserve would need to raise interest rates further to curb inflation.

Overnight index swaps still indicate that the market sees roughly a one-third probability of a 25-basis-point rate hike at the Fed’s July 29 meeting. However, rates on contracts maturing next year fell by about 5 basis points, reflecting a reduced likelihood that more than two rate hikes will be needed by then.

The expectations for Fed rate hikes were also influenced by consumer confidence data. The Conference Board’s consumer confidence index for July dropped to 90.8, weaker than market expectations, which had anticipated an increase. The data reflects a deterioration in consumers’ views of the economic situation and labor market conditions.

The Nasdaq 100 index fell by as much as 2.1%, hitting its lowest level since April 30, before paring some of its losses. The $44 billion 7-year Treasury note auction came in at a high yield of 4.473%, the highest since December 2024, and above the pre-auction trading level of 4.471%, indicating slightly weaker demand. However, the yield on the 7-year note in pre-auction trading had already fallen by more than 6 basis points intraday. Following the auction, Treasuries maintained their gains, with yields staying near their session lows.

As of 4:06 PM Eastern Time, the 2-year Treasury yield fell 4.8 basis points to 4.2747%; the 5-year yield dropped 4.7 basis points to 4.3574%; the 10-year yield declined 5.1 basis points to 4.5981%; and the 30-year yield decreased 4.9 basis points to 5.0876%. The spread between the 5-year and 30-year yields narrowed by about 0.3 basis points to 72.74 basis points, while the spread between the 2-year and 10-year yields also narrowed by roughly 0.3 basis points to 32.14 basis points.