Long maturities jump as global growth worries persist

NEW YORK: Long-dated US Treasury prices jumped on Tuesday, pushing benchmark 10-year yields below 2 percent for the first time since May 2013, as investors worried about tumbling oil prices and weak global growth sought safety in government debt.

Price gains were strongest in 30-year bonds, which were last up 1-1/32 after their yields touched fresh 29-month lows of 2.527 percent.

The long bond, which last yielded 2.5587 percent, ended 2014 with a yield of 2.753 percent and has produced a total return of nearly 3 percent during this year's first two trading days, as big investors reallocate holdings out of riskier sectors such as equities.

Last January, according to Reuters data, the 30-year had its best first month of the year since at least 1997, with a total return of 6.2 percent.

Prices for 10-year Treasury notes also climbed, with gains last at 13/32 and carrying a yield of 1.9903 percent, according to Reuters data. The yield, which was as low as 1.959 percent earlier, last stood below 2 percent in mid-October.

Demand for U.S. debt was driven by steadily falling oil prices, which touched a fresh 5-1/2-year low on Tuesday, as well as expectations that the European Central Bank will soon launch a bond-buying program that would be expected to keep pressuring sovereign European bond yields, according to Jake Lowery, portfolio manager at Voya Investment Management in Atlanta.

"As people become concerned about equities, or find lower yields overseas, that increases demand for interest rate risk in the U.S.," Lowery said. "Shorter Treasuries are more affected by market expectations of Fed policy."

Benchmark German and Japanese 10-year yields hit record lows of 0.442 percent and 0.287 percent respectively.

The gains in Treasuries eased after a gauge of growth in the U.S. services sector fell short of expectations for December.

The Institute for Supply Management said on Tuesday its services index fell to 56.2 for December, compared with 59.3 in November. The December figure fell short of the consensus for a 58 reading, according to a Reuters poll.