SynopsisUS Treasury yields pared gains as hopes for a U.S.-Iran agreement faded after Tehran indicated the Strait of Hormuz would remain closed unless Washington met its demands. Markets are now awaiting July CPI data for clues on Federal Reserve policy, with any upside surprise potentially putting renewed pressure on Treasury yields.AgenciesU.S. Treasury yields pared earlier gains on Tuesday as optimism over a potential U.S.-Iran agreement faded after an Iranian official indicated that the Strait of Hormuz would remain closed unless Washington met Tehran's demands, Reuters reported.The benchmark 10-year Treasury yield was down less than 1 basis point at 4.690%, while the 30-year yield was little changed at 5.241%. Bond yields move inversely to prices. The 2-year yield, which is particularly sensitive to expectations for Federal Reserve policy, fell 1.7 basis points to 4.222%.The market's earlier gains were also supported by a well-received $58 billion auction of three-year Treasury notes. The notes were sold at a yield of 4.291%, below forecasts, suggesting investors did not require a premium to absorb the debt supply. The bid-to-cover ratio stood at 2.71, above its 2.61 average, Reuters reported.Treasury yields moved off their session lows after Iran's newly appointed secretary of the Supreme National Security Council said the Strait of Hormuz would remain closed unless the United States changed its approach and accepted Iran's conditions for ending the conflict. Reuters reported that the comments helped revive concerns over prolonged disruptions to energy supplies.Investors await U.S. CPI dataAttention is now turning to Wednesday's U.S. Consumer Price Index report, which could provide fresh clues about the direction of interest rates and Treasury yields.A Reuters poll showed economists expect consumer prices to rise 0.1% in July after falling 0.4% in June. Annual headline inflation is forecast to ease to 3.4% from 3.5%.Core CPI, which excludes volatile food and energy components, is expected to increase 0.2% on a monthly basis, while annual core inflation is forecast to slow to 2.5% from 2.6%.The Producer Price Index is due on Thursday. Economists expect headline PPI to rise 0.2% in July after declining 0.3% in June, with annual inflation forecast to ease to 4.9% from 5.5%.Longer-term inflation expectations remain relatively contained, limiting concerns about a sustained acceleration in prices. However, any upside surprise in the CPI data could put renewed upward pressure on Treasury yields by reducing expectations for monetary easing.September rate expectations easeU.S. interest-rate futures on Tuesday priced in a 48% probability of a rate hike at the Federal Reserve's September meeting, down from 52.2% on Monday, according to Reuters calculations. Markets were pricing in about 29.7 basis points of tightening for the remainder of the year.Following the three-year Treasury auction, the three-year yield declined 1.5 basis points to 4.291%. The sector has risen roughly 11 basis points since the previous auction.The yield curve was broadly stable ahead of the inflation data. The spread between two-year and 10-year Treasury yields stood at 46.4 basis points, compared with 46.2 basis points on Monday.Earlier in the session, the spread widened to 47.6 basis points, its steepest level since May 22. The move reflected a bull-steepening pattern, in which short-term yields decline somewhat faster than longer-term yields as expectations for near-term interest rates shift, Reuters reported.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless(You can now subscribe to our ETMarkets WhatsApp channel)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless