U.S. Treasury yields fell sharply early Wednesday as hopes of a meaningful de-escalation in the two-month-long war in the Middle East sent energy prices lower.

Yields on 10-year U.S. Treasurys — the benchmark for government borrowing — moved 6 basis points lower to 4.0075%.

Shorter- and longer-dated yields also ticked lower in the early hours. The yield on the 2-year Treasury note, which more closely tracks short-term Federal Reserve rate moves, was down more than 6 basis points, reaching 3.8779% by 5:05 a.m. E.T.  The 30-year Treasury yield, meanwhile, dropped 5 basis points to 4.9286%.

One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.

The slide in borrowing costs came as President Donald Trump said that 'Project Freedom' — the U.S. military effort to help "guide" commercial vessels through the Strait of Hormuz chokepoint — had been paused.

Optimism was further boosted after Axios reported that the U.S. and Iran were close to agreeing on a one-page agreement to end the war.

Energy prices fell below $100 a barrel in early trade, with West Texas Intermediate futures plunging 6% to $95.57.

In a Truth Social post, the President said that "Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran."

Elsewhere, traders will be monitoring economic data releases later, including the Mortgage Bankers' Association's latest weekly average 30-year mortgage rate, and private sector job numbers from payrolls processing firm ADP.

The average 30-year fixed-rate increased from 6.35% to 6.37% in the week ended April 24, chiming with a slight uptick in Treasury yields.

On Tuesday, the Bureau of Statistics' latest monthly Job Openings and Labor Turnover Survey (JOLTS) for March showed new positions dropped 6.87 million in March.