Treasury prices give up overnight gains as Iran retaliation not as bad as feared

Treasury prices erased overnight gains and turned lower on Wednesday even after Iran fired missiles at U.S. forces in Iraq.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, rose 4 basis points to around 1.86%, while the yield on the 30-year Treasury bond also climbed to around 2.35%.

Treasuries were bid higher overnight as investors flooded into bonds for safety amid fears of a bigger conflict between the U.S. and Iran.

Iran launched more than a dozen ballistic missiles against multiple bases housing U.S. troops in Iraq in the early hours of Wednesday morning, according to Pentagon officials. There were no reports of casualties so far and the attacks did not target oil infrastructure, which is better than feared.

Yields jumped after President Donald Trump said Iran "appears to be standing down" less than a day after the country attacked Iraqi bases housing U.S. forces.

Strong jobs data also helped lift risk sentiment. ADP and Moody's Analytics said U.S. private payrolls soared by 202,000 last month, compared to an estimate of 150,000.

Still, investors will closely monitor the developments in the Middle East. The strikes came just hours after the funeral of Qasem Soleimani. The slain Iranian military commander was killed by a U.S. drone at Baghdad International Airport late last week, ratcheting up already deteriorating tensions between Iran and the U.S.

Iran has previously said the White House made a "grave mistake" in giving the order to kill Soleimani, with the Islamic Republic's supreme leader Ali Khamenei vowing to deliver "severe revenge" to those responsible.

President Donald Trump responded to Wednesday morning's attacks on Twitter, saying: "All is well!"

"Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good! We have the most powerful and well equipped military anywhere in the world, by far! I will be making a statement tomorrow morning."

The U.S. Treasury is set to auction $24 billion in nine-year and 10-month notes on Wednesday.