NEW YORK: US Treasuries rallied on Wednesday as European government bond yields continued to plumb record lows on expectations the European Central Bank will act sooner to counter low growth and slowing inflation.
Bonds have gained since ECB President Mario Draghi said on Friday the bank was prepared to respond with all available tools if euro zone inflation drops further. Investors took this to mean the ECB could start an asset purchase program or other stimulus measures.
"There is a sympathy uptrade as Europe continues to rally, geopolitical concerns are still out there and there is no data to speak of," said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.
Tensions in the Ukraine added some safety demand for US debt.
Ukraine accused Russian forces of launching a new military incursion across its border on Wednesday, a day after the
leaders of both countries agreed to work towards ending a separatist war in the east of the country.
Light trading volume with many investors on holidays was seen exaggerating Wednesday's rally, while month-end demand is also likely adding to the bid.
Benchmark 10-year notes were last up 8/32 in price to yield 2.37 percent, down from 2.39 percent late on Tuesday. Thirty-year bonds gained 15/32 in price to yield 3.13 percent, down from 3.15 percent.
The Treasury will sell $35 billion in five-year notes on Wednesday, the second sale of $93 billion in new coupon-bearing supply this week. It will also sell as $13 billion in two-year floating-rate notes on Wednesday and $29 billion in seven-year notes on Thursday.
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