NEW YORK: US Treasuries prices rose on Wednesday, with 30-year yields hitting their lowest levels in five months, as a deepening rout in global stock and oil markets stoked a fresh wave of purchases of low-risk government debt.
The bond market rally, however, cooled in late trading as US stocks bounced off their worst levels of the day.
It remained unclear whether the steep drop in oil prices to 13-year lows and the dramatic selloff on Wall Street this month would stop.
Until investor confidence returns, the safe haven appetite for Treasuries will likely persist, analysts and investors said.
"This negative sentiment is taking hold. It's a fever that needs to run its course," said Aaron Kohli, interest rate strategist at BMO Capital Markets in New York.
Wednesday's weaker-than-expected data on US consumer prices and housing starts supported worries about slowing domestic growth and bets the Federal Reserve would refrain from raising interest rates in the first quarter.
Interest rates futures implied traders see a 29 percent of a Fed rate hike at the March policy meeting, down from 40 percent on Tuesday and 60 percent a month earlier, according to CME Group's FedWatch program. Benchmark 10-year Treasuries notes were up 13/32 in price for a yield of 1.991 percent, down 4.5 basis points from late on Tuesday.
The 10-year yield fell as low as 1.939 percent earlier on Wednesday, the lowest since Oct. 2, according to Reuters data. The 30-year bond gained 26/32 in price to yield 2.766 percent, down 8 basis points on the day.
The 30-year yield hit 2.711 percent, the lowest level since Aug. 24. The five-year yield fell to 1.373 percent, its lowest level since late October, while the two-year yield slipped below 0.80 percent to its lowest point since early November.
While some investors have scrambled for the apparent safety of Treasuries, others were reluctant to jump on the bandwagon.
"I don't see a lot of long-term value in Treasuries even with this flight-to-safety and deflation protection.
There is a limit on how low yields could go," said Eric Stein, co-director of global income group at Eaton Vance in Boston. Still, anxiety over the economic damage from a further decline in energy prices remains.
US crude futures fell to their lowest levels since September 2003. They settled nearly 7 percent lower at $26.55 a barrel.
Tumbling oil prices fed worries about weak global growth and the profits of energy companies.
The Standard & Poor's 500 index was down more than 3 percent before reducing its drop to 0.8 percent in late afternoon trading.
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