Treasury yields inched lower on Wednesday as investor optimism over a potential settlement to the war in Iran was undented by pressure on the fragile ceasefire between Washington and Tehran.
The yield on the 10-year U.S. Treasury note — the key benchmark for U.S. government borrowing — fell 1 basis point to 4.481%.
The 2-year Treasury note yield, which closely tracks short-term Federal Reserve interest rate policy, also dropped more than a basis point to 4.035%. The longer-dated 30-year Treasury bond yield also declined more than a basis point to 5.01%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
U.S. forces carried out what the Pentagon described as "self-defense" strikes in southern Iran early Tuesday, targeting missile launch sites and Iranian vessels allegedly attempting to deploy mines, even as Washington insisted it was still observing restraint under a ceasefire framework.
In response, Iran's foreign ministry accused the U.S. of a "gross violation" of the terms of the ceasefire.
Oil prices fell Wednesday as traders hoped for progress on peace negotiations between the U.S. and Iran. Brent crude futures closed down 5.31% to $94.29 per barrel, while U.S. West Texas Intermediate crude futures lost 5.55% to settle at $88.68 a barrel.
Traders are keeping an eye out for April's personal consumption expenditures price index reading, due at 8:30 a.m. on Thursday morning. The report, which serves as the Federal Reserve's preferred inflation metric, is expected to show inflation moving farther away from the central bank's 2% target.
Global sovereign bond markets broadly rallied on Wednesday. U.K gilts extended a relief rally that began on Friday as investor concerns about domestic political developments began to ease.
— CNBC's Sarah Min contributed reporting.