NEW YORK: US Treasury yields fell to nine-month lows on Tuesday on safety buying as oil prices resumed their slide, with investors also focused on a closely watched employment report on Friday for signs about the strength of the US economy.
Volatile oil and stock prices have boosted demand for safe-haven bonds in recent weeks.
Oil fell around 4 percent on Tuesday, dented by worries about the demand outlook and rising supply, while hopes for a deal between OPEC and Russia on output cuts faded.
Added demand for Treasuries after yields broke below recent resistance levels and market positioning was also seen potentially adding to the strength of Tuesday's rally.
"I think the reaction in the bonds is greater than you would think from the stimulus of oil and the stock market," said Lou Brien, a market strategist at DRW Trading in Chicago.
"Part of it is maybe people started leaning the wrong way last week if they thought we'd seen the bottom in crude and stocks," he said.
Benchmark 10-year notes were last up 22/32 in price to yield 1.89 percent, down from 1.97 percent late on Monday and the lowest since April 28.
The yields have dropped from 2.30 percent at the beginning of the year. Investors this week are also evaluating a heavy calendar of new economic data for further signs of the strength of the US economy, after a string of disappointing releases showed slowing growth.
Some traders and strategists see bonds as vulnerable to losses if data shows the economy picking up steam. "Right now our markets are priced for near-recession," said Jim Kochan, chief fixed income strategist at Wells Fargo Funds Management Group in Menomonee Falls, Wisconsin.
"Any set of data that hint at better growth rather than very weak growth is going to hurt the bond markets."
Friday's employment report is expected to show that employers added 190,000 jobs in January, according to the median estimate of 108 economists polled by Reuters.
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