NEW YORK: US Treasury yields fell on Tuesday after Saudi Oil Minister Ali Al-Naimi effectively ruled out production cuts by major crude producers anytime soon, sending oil and stock prices lower.
Naimi said he was confident more nations would join a pact to freeze output at existing levels in talks expected next month, but that markets should not view the nascent agreement as a prelude to production cuts.
Signs that the oil and equity markets are stabilizing after dramatic price drops earlier this month had reduced demand for Treasuries, lifting yields from three-year lows reached on Feb. 11. "Everything's moving off the oil complex we're still trading off the global risk tone," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.
Benchmark 10-year notes rose 6/32 in price to yield 1.75 percent, down from 1.76 percent late Monday.
The Treasury saw solid demand for a $26 billion sale of two-year notes on Tuesday, the first sale of $88 billion in coupon-bearing debt this week.
The government auctioned the notes at a high yield of 0.752 percent, the lowest level since the two-year auction held in September.
Demand ahead of Monday's month-end is likely to help the government's remaining auctions this week. The Treasury will sell $34 billion in five-year notes on Wednesday and $28 billion in seven-year notes on Thursday.
"Month-end is a pretty big index extension," said Dan Mulholland, head of Treasuries trading at Credit Agricole in New York, noting that five-year notes are also attractively priced relative to other maturities.
Data on Tuesday gave a mixed picture on the US economy.
A housing report showed that US home resales unexpectedly rose in January, reaching a six-month high.
That strength was echoed by another release showing a solid rise in house prices in the year to December. But the economic outlook was tempered by a fall in consumer confidence this month amid a stock market rout.
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