NEW YORK: The US 30-year Treasuries yield fell to a record low on Wednesday as disappointing US retail sales data raised bets the Federal Reserve would not raise interest rates this year.
A 0.9 percent drop in retail sales in December, the steepest in 11 months, extended the US bond market's rally in the first two weeks of 2015, which has been underpinned by worries about deflation spreading across Europe and the effect of tumbling oil prices on corporate earnings and capital investments.
"People had thought lower oil prices would help consumer spending. People are very confused so they run into safety assets," said Stanley Sun, interest rate strategist at Nomura Securities International in New York. Another sell-off in US stocks added to the safe-haven bid for Treasuries, sending the 30-year yield to a record low of 2.395 percent, according to Tradeweb.
Long-dated US government debt has carried its 2014 winning streak into the new year. Treasuries due in 20 years and beyond have generated 5.1 percent in total return in early 2015, following a 27.5 percent gain last year, according to an index compiled by Barclays.
In early US trading, the 30-year bond yield was last at 2.436 percent, down 4 basis points from late Tuesday.
The yield on the benchmark 10-year Treasuries note was 1.828 percent, down 6 basis points after hitting a near 20-month low of 1.784 percent.
Earlier, the five-year yield posted a three-month low at 1.247 percent, while two-year yields fell to 0.452 percent, the lowest since Oct. 29, according to Reuters data. The record low 30-year yield came in advance of a $13 billion auction of long bond supply at 1 p.m. (1800 GMT), which might not appeal to investors who seek higher yields, analysts said.
"This auction unloads a lot of duration on the markets when the compensation for that duration risk is likely to be the lowest for any 30-year auction day in American history," analysts at RBS Securities wrote in a research note published before the December retail sales data.
In the 'when-issued' market, traders expected the second reopening of the 30-year bond introduced in November to sell at a yield of 2.441 percent, down some 40 basis points from the yield at the December auction.
The upcoming 30-year supply was on track to post its lowest yield ever at an auction, below the record low of 2.580 percent set in July 2012, Treasury data showed.
Nomura's Sun said the current intense demand for Treasuries should stoke bidding for the latest 30-year supply. "The risk-off sentiment along should support this auction," he said.
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