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Investors focused on fragile Israel-Iran ceasefire

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German budget adds selling pressure for long-dated debt

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Two-year auction later on Tuesday

By Davide Barbuscia

NEW YORK, June 24 (Reuters) - U.S. Treasury yields were

roughly unchanged on Tuesday amid fragile optimism over a

ceasefire between Israel and Iran, uncertainty over the path of

interest rates, and concerns over global demand for long-dated

government debt.

President Donald Trump on Monday announced a ceasefire between

Israel and Iran that offered relief to rattled investors after a

12-day conflict that bruised global risk assets and stoked

inflation fears. Markets welcomed the move and largely brushed

off ceasefire violations by both sides.

Treasury yields, which rise when prices drop, had climbed

earlier in the day, mirroring a surge in Germany's long-term

bond yields that was sparked by a draft budget that included

record investment and higher borrowing. Shorter-dated Treasury

yields were also higher in early trade, likely in anticipation

of a two-year note auction later in the day.

The mild selling pressure also likely reflected concerns over

the path of interest rates after U.S. Federal Reserve Chair

Jerome Powell said on Tuesday the central bank needed more time

to see if rising tariffs drive inflation higher before

considering rate cuts.

Those comments followed recent remarks from two Fed

officials, both Trump appointees, who said rates could fall as

soon as the July meeting given inflation has not yet risen in

response to tariffs.

Trump, who tapped Powell as Fed chair during his first term

but is widely expected to replace him when his tenure ends next

spring, has repeatedly pushed for aggressive interest rate cuts.

"Treasuries are under a little bit of pressure, even though

I think other factors such as lower crude oil ... and weak

economic data should be more important," said Tony Farren,

managing director at Mischler Financial Group.

Euro zone government bond yields surged on Tuesday after the

German cabinet passed a draft budget for 2025 and framework for

2026 that include record investments in both years to stimulate

growth in Europe's biggest economy.

That added a steepening impulse to the U.S. Treasury yield

curve too, meaning it contributed to some selling pressure for

long-dated debt, as higher global government debt supply could

erode demand for Treasuries.

"It is very difficult to say what is driving price action

now because of geopolitics," said Slawomir Soroczynski, head of

fixed income at Crown Agents Investment Management. "There's

definitely some inspiration coming from (German) bunds and a

decent steepening pressure there today," he added.

Benchmark 10-year Treasury yields were last at 4.314%, less

than one basis point lower than on Monday, while 30-year yields

were unchanged at 4.858%. Two-year yields were at 3.818%, one

basis point lower than on Monday.

Later on Tuesday, the Treasury Department will sell $69

billion in two-year notes. That will be followed by sales of

five-year and seven-year debt on Wednesday and Thursday.