U.S. Treasury securities closed higher on Tuesday, with the majority of gains occurring during the American trading session. The advance was supported by a decline in crude oil futures, driven by indications that the United States and Iran might resume negotiations. However, trading volume in futures contracts was below average. German government bonds outperformed U.S. Treasuries after European Central Bank President Christine Lagarde indicated the bank is not inclined towards a policy tightening stance.

Shortly after 3:00 PM New York time, spot Treasury yields were down by 2 to 4 basis points. The middle part of the yield curve led the declines, with the 2s5s30s butterfly spread narrowing by 2 basis points on the day.

The 10-year Treasury yield was near 4.25%, falling 4 basis points and approaching its intraday low, though its decline still lagged behind comparable German and U.K. government bonds. Remarks from President Lagarde helped reduce market expectations for ECB interest rate hikes, with short-term German bond yields falling more than 10 basis points.

Overnight Index Swap (OIS) contracts priced in approximately 9 basis points of Federal Reserve rate cuts by its December meeting, up from 7 basis points at Monday's close. The market has fully priced in a 25-basis-point rate cut by September 2027.

West Texas Intermediate (WTI) crude oil futures settled down 7.9%, reaching their lowest level since March 25. This drop followed reports that the U.S. and Iran are discussing holding a new round of face-to-face negotiations.

As of 3:00 PM, trading volume in U.S. Treasury futures was 55% of the 20-day average, while Secured Overnight Financing Rate (SOFR) futures volume was between 45% and 65% of average levels. Trading activity included a block purchase of 12,000 two-year Treasury futures contracts, which provided support for that sector early in the U.S. afternoon session.

As of 3:30 PM Eastern Time: - The 2-year Treasury yield was 3.7491%; - The 5-year Treasury yield was 3.8694%; - The 10-year Treasury yield was 4.2518%; - The 30-year Treasury yield was 4.8674%; - The yield spread between 5-year and 30-year Treasuries was 99.62 basis points; - The yield spread between 2-year and 10-year Treasuries was 50.07 basis points.