Middle East ceasefire lowers Turkey risk premium and U.S. yields

A temporary ceasefire involving the United States, Iran, and Israel has triggered positive sentiment in global financial markets. Following diplomatic mediation led by Pakistan, U.S. President Donald Trump announced a two-week suspension of military operations against Iran. This decision follows a plan to reopen the Strait of Hormuz and includes a 10-point proposal from the Tehran administration.

The geopolitical easing has led to a significant decline in borrowing costs and risk perceptions. Turkey’s 5-year Credit Default Swap (CDS) fell to 217 basis points, marking its lowest level since February 18. Simultaneously, U.S. Treasury yields saw sharp decreases, with the 10-year yield dropping 8 basis points to 4.24% and the 2-year yield falling 9 basis points to 3.73%.