NEW YORK: US Treasury yields fell on Thursday as the previous session's dramatic rally in stocks ran out of steam, reviving demand for low-risk US government debt.
US stocks slid back the day after a spectacular rally lifted the blue-chip Dow Jones Industrial Average more than 1,000 points in one day for the first time ever. That came after the S&P 500 index on Monday tumbled to the brink of a bear market.
"The market traded well overnight as equities came off and it feels like a little bit of a bid here," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.
Stocks have been hurt on concerns that continuing Federal Reserve interest rate hikes will slow the economy, a move that has benefited bond prices.
Interest rate futures traders are now only partially pricing in one rate hike for all of 2019, according to the CME Group's FedWatch Tool.
A measure of US consumer confidence posted its sharpest decline in more than three years in December, rattling investors already nervous about the prospect of a slowdown.
A partial shutdown of the federal government is adding to economic uncertainty.
US President Donald Trump said on Tuesday the shutdown would last until his demand for funds to build a wall on the US-Mexico border is met.
Thin liquidity after the Christmas holiday on Tuesday and before the New Year holiday next Tuesday has added to volatility.
"A lot of people's books are closed and it's not going to be the most active. Moves can be exacerbated just given the time of year," Lederer said.
Benchmark 10-year notes gained 17/32 in price to yield 2.736 percent, down from 2.806 percent on Wednesday. The yields have dropped from a seven-year high of 3.261 percent on Oct. 9.
The Treasury Department sold $32 billion in seven-year notes to strong demand, the final sale of $113 billion in coupon-bearing supply this week.
Indirect bidders, which include fund managers and central banks, took 67 percent of the sale, the most since January.
The government sold $41 billion of five-year debt on Wednesday to tepid demand with the weakest bid-to-cover ratio, a gauge of overall auction hunger, in about 9-1/2 years.
Demand for the five-year notes was likely hurt by holidays in many major markets on Wednesday.
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