Bond yields dip before 10-year note auction

NEW YORK: US Treasuries yields fell on Wednesday on safety buying as stocks and oil prices fell, and before a government auction of $21 billion in reopened 10-year notes, which is expected to see solid demand.

Treasuries have gained this week as concerns about falling oil prices and slowing global growth added a safety bid to the debt.

A hunt for higher yields also has led many investors to reach out to longer-dated Treasuries, with few alternatives for high-quality bonds, a factor that is likely to help this week's auctions.

"I'm not quite so sure that demand is going to be as strong as what it might have been at a little bit lower levels, but given the positive outlook for inflation and demand for US debt compared to other global sovereign yields, I would suspect that the auctions should go well," said Mary Ann Hurley, vice president of trading at D.A. Davidson Co in Seattle.

Besides the $21 billion in reopened 10-year notes due to be sold on Wednesday, the Treasury will sell $13 billion in 30-year bonds on Thursday. It sold $25 billion in 3-year notes on Tuesday.

Benchmark 10-year notes were last up 4/32 in price to yield 2.20 percent, down from 2.22 percent late on Tuesday. That compares to yields of 0.68 percent for comparable German government debt, which fell to record lows on Wednesday.

Thirty-year bonds gained 8/32 in price to yield 2.86 percent, down from 2.88 percent.

The Treasury yield curve steepened slightly but held near its flattest in six years as investors bet that the recent strong US jobs report for November will keep the Federal Reserve on course to raise interest rates next year.

Slowing global growth and political uncertainty in Greece are offsetting yield increases that would normally be expected as the US economy strengthens.

Greek stocks and bonds fell, with short-term yields rising above long-term yields, ahead of next week's presidential vote, pushing the borrowing costs of all peripheral euro zone governments higher.

Greek Prime Minister Antonis Samaras moved the country's presidential election forward by two months, a gamble that threatens to trigger an early parliamentary election and catapult the leftist anti-bailout Syriza party to power.