NEW YORK: Long-dated US Treasuries yields fell on Monday as oil prices fell to five-year lows, denting inflation expectations and raising the appeal of long-maturity bonds over shorter-dated issues.
An earlier rebound in oil prices faded after OPEC exporters said they wouldn't cut production despite worries about a supply glut. This renewed selling in stocks and buying in longer-dated Treasuries, analysts said.
"We are again seeing a pullback in energy prices. That's weighed on stocks and put a bid back in Treasuries," said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut.
Concerns about weakening growth and inflation globally have also underpinned the appetite for 10- and 30-year Treasuries, whose yields fell to two-month lows earlier Monday.
Those worries have supported bets the Federal Reserve might consider keeping its pledge to leave short-term interest rates near zero for a "considerable period" in its latest policy statement at a two-day meeting beginning on Tuesday.
The yield on benchmark 10-year Treasury notes was 2.113 percent, up 1 basis point from late on Friday. It struck a two-month low at 2.071 percent in overnight trading.
The 30-year Treasury yield fell 1 basis point to 2.745 percent after it briefly narrowed its premium over the five-year yield to a six-year low of 1.17 percent.
Treasury Inflation-Protected Securities' yield gaps versus regular Treasuries, which gauge investors' inflation expectations, shrank to fresh multi-year tights on Monday. The five-year TIPS inflation breakeven rate fell nearly 4 basis points to 1.10 percent. This was the lowest since September 2010, Reuters data showed.
In the oil market, January US crude futures on the New York Mercantile Exchange fell 2.7 percent to $56.25 a barrel after hitting a fresh five-year low at $55.87.
The renewed slump in oil sent major US stock indexes into negative territory the session after the Standard & Poor's 500 suffered its worst week in more than two years.
On the data front, the New York Federal Reserve's index of regional business activity unexpectedly slumped to a two-year low in December, while a gauge on US homebuilder sentiment fell slightly short of market expectations this month.
On the other hand, the government said industrial output rose 1.3 percent in November for its biggest monthly rise in more than 4-1/2 years.
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