Long bond yield nears landmark low

Long-dated US Treasury prices jumped on Tuesday, pushing 30-year yields near record lows, as worries about tumbling oil prices and weak global growth pushed investors toward safer government debt. Price gains were strongest in 30-year bonds, which were last up 1-28/32 after their yields dipped as low as 2.471 percent and neared lows last seen during July 2012.
The record low yield for the long bond was 2.4430 percent, set on July 26, 2012, according to Reuters data.
The long bond, which last yielded 2.5191 percent, ended 2014 with a yield of 2.753 percent and produced a total return of nearly 3 percent during this year's first two trading days, as big investors reallocate holdings out of riskier sectors such as equities.
Last January, according to Reuters data, the 30-year had its best first month of the year since at least 1997, with a total return of 6.2 percent.
Prices for 10-year Treasury notes also climbed, with gains last at 27/32 and carrying a yield of 1.9436 percent, according to Reuters data.
The 10-year's yield, which was as low as 1.887 percent on Tuesday, briefly last traded below 2 percent in mid-October with yields as low as 1.865 percent, according to Reuters data.
Demand for US debt was driven by steadily falling oil prices, which touched a fresh 5-1/2-year low on Tuesday, as well as expectations that the European Central Bank will soon launch a bond-buying program that would be expected to keep pressuring sovereign European bond yields, according to Jake Lowery, portfolio manager at Voya Investment Management in Atlanta.
"As people become concerned about equities, or find lower yields overseas, that increases demand for interest rate risk in the US," Lowery said. "Shorter Treasuries are more affected by market expectations of Fed policy."
Benchmark German and Japanese 10-year yields hit record lows of 0.442 percent and 0.287 percent respectively.
Treasury prices moved sharply on Tuesday, largely because institutional investors were just beginning to take positions for 2015, according to Scott Graham, head of the primary dealership at BMO Capital Markets in Chicago. "It's early in the year, and there are not a lot of chips on the table yet. As a result of that ... large trades have pretty significant price movements," Graham said.