U.S. Treasuries extended their losses in late trading, with short-dated notes leading the decline and the yield curve flattening after oil prices climbed above $90 per barrel for the first time since late July. Meanwhile, overnight index swaps continued to price in additional rate hikes, with a quarter-point increase at the Fed's October meeting now fully reflected in market expectations.

Just after 3:00 PM in New York, Treasury yields rose by 2 to 5 basis points, with the largest gains concentrated in short- and intermediate-term maturities. The 2s10s spread and 5s30s spread narrowed by 0.5 basis points and 3 basis points, respectively, on the day. The 2s5s30s butterfly spread widened by approximately 3.5 basis points and settled near its intraday high.

The selloff in Treasuries gathered further momentum during the U.S. afternoon session as oil prices continued their upward trajectory. By roughly 3:00 PM, WTI crude futures had advanced about 5.4%, driven by concerns over prolonged disruptions to energy shipments through the Strait of Hormuz following the latest U.S. strike on Iran.

In the cash market, long-end swap spreads narrowed slightly, poised to break a streak of three consecutive sessions of widening. In the front-end rates swap market, traders still priced in roughly 17 basis points of hike premium for the September FOMC meeting, with cumulative tightening expectations for the year now standing at 40 basis points, up from 38 basis points at Monday's close.

As of 4:59 PM Eastern Time, the 2-year Treasury yield stood at 4.3998%; the 5-year yield was 4.5551%; the 10-year yield was 4.7981%; the 30-year yield was 5.273%. The 5-year/30-year yield spread was 71.71 basis points, while the 2-year/10-year spread was 39.41 basis points.