U.S. Treasury yields fell on Tuesday as the market reopened after the Labor Day holiday. Traders cited former President Trump's recent comments suggesting progress in talks with Tehran as the catalyst for the rally. The sell‑off in bonds lifted notes and longer‑dated securities, narrowing spreads widened during the break. Fund managers noted that Treasury‑linked ETFs gained roughly 0.8 percent, reflecting broad demand for safety.

Investors interpreted the signal as a reduction in geopolitical risk, prompting a shift from cash equities into safe‑haven assets. Treasury futures rallied 10 basis points, while the 10‑year yield slipped below 4.2 percent, a level not seen since early summer. The move also pressured the dollar, which retreated against the euro and yen. The bond rally also nudged mortgage rates lower, easing homeowner refinancing costs.

The rally underscores how diplomatic cues can sway fixed‑income markets, reminding portfolio managers to monitor political developments closely. With the Treasury curve tightening, borrowing costs for corporations and municipalities may ease in the near term. However, any reversal in the Iran negotiations could quickly restore volatility, leaving investors wary of a sudden yield spike.