NEW YORK: US Treasuries prices fell on Wednesday as a recovery in oil prices spread to global stock markets and a failed German debt auction encouraged investors to move into stocks from bonds, ahead of a $21 billion 10-year note auction.
The sell-off in Treasuries followed Berlin's third failed auction, where low yields suppressed investor appetite for a German 10-year benchmark Bund, suggesting that investors are not prepared to increase exposure to bonds.
"The failed Bund auction is adding pressure to Treasuries that already look a bit weaker on top of pressure from strengthening equities," said Ellis Phifer, market strategist at Raymond James in Memphis, Tennessee.
While government debt underperformed, global equities rallied for a sixth straight day on mining and energy shares as investors bought into the prospect of continued support from the world's central banks.
US stocks opened higher on Wednesday as crude oil prices rose for the fourth day in a row, with the benchmark S&P 500 index up 0.77 percent, the Dow Jones Industrial Average up 0.80 percent and the Nasdaq composite up 0.54 percent.
Expectations that the US Federal Reserve will lift rates this year faded further since a government report last Friday showing the US economy added far fewer jobs than expected.
The report along with concerns about slowing global growth has traders expecting a rate hike no sooner than March 2016 and briefly pushed benchmark yields to their lowest levels since April on Friday.
"It's clear that once the Fed begins raising interest rates, the process will be slower than we've ever seen," said Phifer.
On the supply front, the US Treasury's 10-year note sale followed a mediocre auction of three-year notes on Tuesday. The Treasury will complete this week's debt sales with a $13 billion auction of 30-year bonds on Thursday.
On the open market, benchmark 10-year Treasuries were down 9/32 in price to yield 2.067 percent, up 3 basis points from late Tuesday.
The 30-year bond was down 16/32 in price to yield 2.898 percent, up 2.5 basis points from Tuesday.