NEW YORK: The US Treasury debt market rallied on Wednesday with benchmark yields hitting their lowest levels in over two months as tumbling stock and oil prices stoked investor anxiety, rekindling safe-haven bids for bonds.
The scramble for bonds fed intense demand at a $21 billion auction of U.S. 10-year Treasuries notes and $46 billion worth of debt from brewer AB InBev, which was the second largest bond corporate bond deal ever.
"Volatility is here is to stay until there are signs of stability in the stock and commodities markets. This creates demand for high-quality bonds like Treasuries and deals like AB InBev," said Matt Brill, senior portfolio manager of fixed income at Invesco in Atlanta.
Treasuries' rebound erased their initial losses tied to better-than-expected Chinese trade data, which had soothed some worries about global economic growth and stoked buying of Wall Street shares and oil futures.
However, data showing a rise in U.S. oil supply alarmed traders during U.S. trading. U.S. crude futures briefly traded below $30 a barrel for the first time since December 2003. The bearish sentiment spread into Wall Street with major indexes shedding more than 2 percent.
Two Federal Reserve officials voiced some of the worries among investors and traders about China and tremendous market swings since the start of 2016.
The rout in China's stock market, weak oil prices and other factors are "furthering the concern that global growth has slowed significantly," Boston Fed President Eric Rosengren said.
Chicago Fed chief Charles Evans said he is nervous about the potential effects of China's slowdown on the U.S. economy and about the possibility that inflation expectations may be slipping.
Still, the Fed's latest Beige Book on regional economic conditions showed the economy continued to expand even as it was restrained by a strong dollar and weak energy prices.
In late U.S. trading, benchmark 10-year Treasuries notes were up 9/32 in price for a yield of 2.066 percent, down 3 basis points. The 10-year yield hit 2.042 percent, which was its lowest since Oct. 28.
The two-year yield slipped 2 basis points to 0.903 percent after touching its lowest in a month.
The 30-year yield hit 2.817 percent, its lowest since early October. It was last down 3 basis points at 2.844 percent.
The U.S. Treasury Department will sell $13 billion in 30-year supply on Thursday, completing this week's $58 billion fixed-rate Treasuries supply.
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