NEW YORK: US Treasury yields ended higher on Wednesday as oil prices and stocks gained, after earlier falling to one-year lows on data that showed slowing growth in the U.S. service sector, adding to concerns about the weakening US economy.
Oil prices rose 8 percent on Wednesday, snapping a two-day rout, while stocks turned positive in late day trading.
The move capped a volatile day that saw benchmark 10-year note yields plunge below technical resistance to a low of 1.7930 percent, the lowest since Feb. 5, 2015, before rising back to 1.883 percent.
The yields have tumbled from 2.30 percent this year on safety buying as oil and stock prices are down since the start of the year, with fears now also rising that the U.S. is facing a slowdown.
Activity in the vast U.S. services sector slowed to a near two-year low in January, suggesting that economic growth weakened further at the start of the first quarter even as the labor market remains resilient.
"The rally in the long-end of the U.S. curve represents genuine concerns about domestic economic growth," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia.
The next major economic release is Friday's employment report, which is expected to show that employers added 190,000 jobs in January, according to the median estimate of 108 economists polled by Reuters.
U.S. private employers added 205,000 jobs in January, above economists' expectations, a report by a payrolls processor showed on Wednesday.
William Dudley, president of the Federal Reserve Bank of New York, said on Wednesday that financial conditions have tightened considerably in the weeks since the U.S. Federal Reserve raised interest rates, which monetary policy makers will have to take into consideration should the phenomenon persist.
The federal fund futures market now indicates that traders no longer expect the Fed to raise interest rates this year.
The Bank of Japan's introduction of negative interest rates on Friday has also helped boost demand for U.S. bonds, which pay higher yields than Japanese and European sovereign debt.
"With Japan going to negative rates, and fears of negative rates everywhere, people look at the U.S. as the place to be, so it's driving the yields lower," said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York.
The U.S. Treasury also said on Wednesday it will reduce coupon sizes across the board during the first quarter and increase Treasury bills.
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