Treasuries Climb as Sliding Stocks, Oil Boost Demand for Havens

  • U.S. auctions $26 billion of two-year notes yielding 0.752%
  • Bond-market gauge of inflation expectations increases

Treasuries rose for the first time in three days as a slide in oil prices and stocks spurred demand for U.S. debt.

Yields turned lower as stocks and crude prices tumbled on news Saudi Arabia won’t cut production. Gauges of bond-market inflation expectations still rose, a sign investors are concerned that oil’s decline will impact energy companies more than the long-term inflation outlook, said Gennadiy Goldberg, an interest-rate strategist in New York at TD Securities LLC, one of the 22 primary dealers that trade with the Federal Reserve.

“That’s part of what’s weighing on risk sentiment in general -- that the oil companies are having a tougher time,” he said.

U.S. 10-year note yields fell three basis points, or 0.03 percentage point, to 1.72 percent as of 5p.m. New York time, according to Bloomberg Bond Trader data. The 1.625 percent security due in February 2026 rose 1/4, or $2.50 per $1,000 face amount, to 99 3/32.

Puzzled Clients

Treasuries remained higher after the U.S. sold $26 billion of two-year notes. The notes sold at a yield of 0.752 percent, compared with 0.860 percent at the previous sale of the securities on Jan. 26.

Goldberg said he has gotten nearly as many calls from puzzled clients this week as he did during a rally earlier this month that sent Treasury yields as low as 1.53 percent. That’s because Monday’s stock-market gain of 1.4 percent led to a smaller declines in Treasuries than most investors expected, he said. Then, the midday drop in yields Tuesday mirrored a decline in oil, yet the bond-market gauge of inflation expectations didn’t fall.

“These are almost head-scratching phone calls,” he said. “During a panic, it’s, ‘what’s happening here, what am I missing?’ Now, it’s ‘why is the market moving the way it is?”’

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