TREASURIES-US yields flat amid shaky Mideast truce, global bond supply concerns

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.