US yields move to four-week low

US Treasuries prices rose on Tuesday, pushing benchmark yields below 2 percent for the first time in over four weeks, as worries about the pace of global economic growth bolstered demand for safe-haven US government debt. Concerns about Europe's debt problems also resurfaced as Spanish 10-year yields soared to nearly 6 percent, a level seen as unsustainable in the long run.
Investors had already been seeking the safety of US government bonds after Friday's disappointing US jobs report cast doubts on the pace of economic recovery in the world's largest economy. Growth concerns increased further on Tuesday after China reported a surprise March trade surplus that was driven by a pick-up in exports but also by lower-than-expected imports, which underscored its slowing domestic economy.
"The bad news on (US) employment brought about more doubt about the global recovery and how vulnerable we are to the double-dip (recession)," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts. Reflecting investors' demand for safe-haven assets, a government auction of three-year Treasury notes attracted the highest proportion of indirect bidders, considered a measure of overseas interest, since August 2011.
"It appears (that) foreign bidders showed buying interest despite the shortened holiday week," said George Goncalves, head of US rates strategy at Nomura Securities International in New York. "These stats, despite coming in at the highs of the day, are a sign that euro zone issues are back to being very significant drivers of the US Treasury market."
Benchmark 10-year Treasury notes rose 18/32 in price to yield 1.984 percent, marking the lowest since March 8 and down from 2.05 percent late Monday. Thirty-year bonds gained 1-8/32 in price to yield 3.13 percent, down from 3.20 percent late Monday. Benchmark yields were still suffering the impact of Friday's US jobs data, which caused investors to increase bets on additional monetary stimulus measures by the Federal Reserve.
As part of its current stimulus program dubbed "Operation Twist," the Fed bought $1.843 billion of longer-dated Treasuries on Tuesday morning. It was also scheduled to buy a further $4.25 billion to $5 billion of longer-dated Treasuries on Tuesday afternoon. Under Twist, the Fed is selling shorter-dated holdings and buying longer-dated debt to extend the maturity of its portfolio. The program is scheduled to last through June. While the Fed is buying, the US Treasury will sell $21 billion of reopened 10-year notes Wednesday and $13 billion of reopened 30-year bonds on Thursday.