NEW YORK: US government bonds rallied and 30-year Treasury yields dropped to their lowest in two months on Tuesday as falling equity markets and oil prices increased demand for safe haven US debt.
Oil prices fell to five-year lows, adding to worry about global economic growth, while Greek share and sovereign bond markets plunged after the government brought forward a presidential vote in a political gamble that heightened uncertainty over the country's transition out of its IMF/EU bailout.
China's official bond clearing house also rattled markets by tightening collateral rules. It excluded about 500 billion yuan ($81 billion) worth of corporate bonds from being used for bond repurchase agreements.
"There's a flight to quality bid that is overwhelming any of the economic fundamental data at the moment," said Ira Jersey, an interest rate strategist at Credit Suisse in New York.
Benchmark 10-year notes were last up 10/32 in price to yield 2.23 percent, down from 2.26 percent late Monday. Thirty-year bonds gained 22/32 in price to yield 2.87 percent, down from 2.90 percent.
The Treasury yield curve was at its flattest in six years on Monday as investors bet that the strong jobs report for November will keep the Federal Reserve on course to raising interest rates next year.
The Federal Reserve's vow to keep interest rates near zero for a "considerable time" will be in focus for any changes to the language when the US central bank meets next week.
The Treasury will sell $25 billion in three-year notes later on Tuesday, the first sale of $59 billion in new debt this week.
Traders expect the new notes will price around 2 basis points higher than they are trading in the secondary market, at 1.06 percent, according to the "when issued" market.
The Treasury will also sell $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday.
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