NEW YORK: Yields on US Treasuries rose on Tuesday in light, choppy trading as dealers awaited a five-year note auction later in the session and as oil prices recouped losses.
The yield on the U.S. two-year note reached 1.083 percent in morning trading, its highest level since April 2010, while the yield on the 30-year bond climbed to a session high of 2.980 percent. Traders attributed the moves to year-end light volume and market choppiness.
"There's no reason to make big moves at the end of the year, and the light conditions mean it doesn't take much to move the markets quite a bit," said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York.
Traders were looking to the Treasury's $35 billion five-year note sale at 1 p.m. (1800 GMT). The auction was expected to be well received given the surprisingly strong demand at the $26 billion sale of two-year notes on Monday.
"Part of the reason you're seeing a sell-off today is because it's a concession for the five-year auction later," said Kohli.
The Treasury will sell $29 billion of seven-year notes on Wednesday, for a total sale of $90 billion this week.
Oil prices recouped some losses as colder weather arrived in Europe and North America, raising hopes of a short-term pickup in demand for crude.
The gains in oil put additional selling pressure on Treasuries as advances in crude prices suggested inflationary pressure. Expectations of higher inflation tend to push 30-year yields up since inflation erodes the interest payment on those bonds.
"The Fed has more or less satisfied its employment mandate, and its next challenge is to meet its inflation mandate," Kohli said. "As long as there aren't drops in oil, that should keep things calm."
Benchmark 10-year U.S. Treasury notes were last down 11/32 in price to yield 2.264 percent, up from 2.225 late on Monday.
The U.S. 30-year bond was last down 1-2/32 in price to yield 2.992 percent, up from 2.94 percent late on Monday.
On Wall Street, the benchmark S&P 500 was last up 0.95 percent.
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