NEW YORK: US Treasury debt yields were pulled lower on Tuesday by Europe's massive bond-buying program and gathering expectations the Federal Reserve will soon shift away from near-zero interest rates.
Yields on the benchmark 10-year Treasury note were last at 2.1438 percent, reflecting a price rise of 15/32, as bond yields in Ireland, Spain and other euro zone countries hit record lows.
Germany's 10-year bund yielded as little as 0.23 percent on Tuesday, the second day of European Central Bank purchases under a one-trillion-euro program meant to revive inflation and economic growth. "If we are yielding 190 basis points better than Europe, that's an allure," said David Ader, head of government bond strategy at CRT Capital in Stamford, Connecticut. "You also got, because of the lower European yields, the dollar on fire."
The dollar's months-long rally, including a 4 percent rise against the euro since March 1, should continue and give foreign investors a cushion against price losses on Treasuries, Ader said.
US yields were also being boosted as institutional investors positioned ahead of a meeting next week of Fed policymakers, who are nearing the first increase in benchmark US lending rates since 2006.
"They aren't going to raise rates at this meeting but they are going to change the language and pave the way," Ader said. Price gains on Tuesday were biggest in longer-maturity Treasuries favored by yield-chasing foreign buyers, with the 30-year last up as much as 1-8/32 and yielding 2.7340 percent.
The seven-year was ahead 10/32 to yield 1.945 percent, while the five-year's yield briefly traded below 1.60 percent and was last at 1.6031 percent, on a price gain for the session of 12/32, according to Thomson Reuters data.
Treasuries were little affected by data showing nearly five US million job openings and a flurry of auctions this week of new US Treasury debt that usually weigh on secondary market prices, according to strategists.
"While broader market focus remains on global themes, investors continue to look ahead toward next week's FOMC meeting, where we expect the Fed to drop the 'patient' reference from their statement," Gennadiy Goldberg, an interest rate strategist at TD Securities in New York, told clients in a note.
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