NEW YORK: US Treasury yields slid on Tuesday, weighed down by concerns about the global economic outlook after the International Monetary Fund reduced growth forecasts for 2019, as well as a round of headlines on Britain's exit from the European Union.
"The Federal Reserve has actually mentioned global growth as a potential headwind," said Wen Lu, rates and volatility strategist at TD Securities in New York. "So the IMF has pointed out something that has been fairly obvious for the market for some time and it's a potential headwind that is on people's radar."
The IMF said on Tuesday it has cut its global growth outlook for 2019 and warned that growth could slow further due to trade tensions and a potentially disorderly Brexit.
Brexit has also been a lingering concern for financial markets as investors worry about the fallout should it fail.
Earlier in the global session, the BBC reported that a British euroskeptic lawmaker had been advised that German Chancellor Angela Merkel was willing to put a five-year time limit on the Northern Ireland backstop in Britain's EU withdrawal agreement. But that was denied by a German government spokesman.
Disagreement between London and the European Union over the "Irish backstop" is blocking a Brexit deal from getting through Britain's parliament.
Gains in Treasury prices also came after losses on Monday in the midst of Saudi Aramco's mammoth bond offering. Dealers historically lock in borrowing costs for corporate bonds they are underwriting by selling Treasuries as a hedge before the deal is completed. Once the bond is sold, the dealer buys back Treasuries to exit the rate lock.
Saudi Aramco's first-ever bond deal was oversubscribed, attracting more than $100 billion in demand. Aramco expects to raise more than $10 billion from the deal, which is split into six tranches with maturities ranging from three to 30 years. The bonds will be priced later on Tuesday.
"I think all the duration went through yesterday in anticipation of that," TD's Lu said. "So today you're seeing a minor retracement of that largely because a lot of the guys are fairly positioned."
In mid-morning trading, US 10-year note yields fell to 2.495pc, down from 2.519pc late on Monday.
US 30-year bond yields were also down at 2.902pc , from 2.924pc on Monday.
On the short end of the curve, US 2-year yields slipped to 2.339pc, compared with Monday's 2.358pc.
Later on Tuesday, the Treasury auctions $38 billion in US three-year notes, kicking off $78 billion in coupon offerings this week.
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