NEW YORK: US Treasury yields fell on Wednesday as falling oil and stock prices, and rising concerns about a British exit from the European Union, increased demand for safe haven bonds.
Oil fell below $33 per barrel on Wednesday after Saudi Arabia on Tuesday ruled out production cuts and an industry report said U.S. crude stockpiles hit a record, underlining the supply glut.
Sterling sank to a seven-year low against the dollar on Wednesday as investors worried that a British exit from the EU would knock the value of the currency down even further.
"You see rates getting dragged along behind crude a fair bit, there's a view it gives some insight into how the rest of the world is going," said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York. "The (potential) British exit is having an impact as well."
Bonds had weakened in the past week on signs that oil and stock prices may be stabilizing, before both assets came under renewed pressure on Tuesday.
Benchmark 10-year notes were last up 17/32 in price to yield 1.69 percent, down from 1.75 percent late Tuesday.
Bonds rallied even as traders prepared for the Treasury to sell $34 billion in five-year notes, the second auction of $88 billion in short-and intermediate-dated debt this week.
Traders covering bets taken last year that the Federal Reserve will raise interest rates has added to the bond rally this year, as disappointing economic data has reduced expectations a hike is imminent.
That may help demand for the five-year notes, which are highly sensitive to interest rate moves.
"The short covering continues and people take a very dim view of global economic growth," said Kohli.
Five-year notes were last up 7/32 in price to yield 1.17 percent, down from 1.22 percent on Tuesday.
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