NEW YORK: US Treasuries ended little changed on Wednesday as oil and stocks reversed earlier losses, with the volatile oil market seen likely to continue to govern bond moves in the near term.
Oil prices rose after strong US gasoline demand offset worries over record high crude stockpiles, helping to reverse an earlier bond rally.
Bonds have largely followed oil moves as tumbling prices this year increase concerns about slowing global growth.
"Rates are 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. Benchmark 10-year notes rose 2/32 in price to yield 1.74 percent, after earlier falling as low as 1.65 percent.
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.
A safe-haven bid for bonds helped the Treasury auction $34 billion in five-year notes to strong demand from fund managers and other investors on Wednesday.
"It went very well," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. "It shows that's there's definitely an end-user demand for Treasuries, and definitely in the belly of the curve."
Five-year notes, which are highly sensitive to interest rate moves, have been among the best performers this year as weakening economic data leads traders to cover bets taken last year that the Federal Reserve is close to raising interest rates.
"There's not a lot of super fundamental reasons to be bullish rates, but it's still a safe-haven for foreign investors, and positioning in the market has been abysmally short for a long time," said BMO's Kohli.
The US will sell $28 billion in seven-year notes on Thursday, the final auction of this week's $88 billion in short and intermediate-dated debt sales.
Bond yields dropped earlier on Wednesday after data showed the services sector contracted in early February for the first time since October 2013.
Other data showed new US single-family home sales tumbled in January from a 10-month high as sales in the West region plunged, but the overall housing market recovery remains intact.
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