Treasuries Advance on Refuge Demand as Crude-Oil Rout Deepens

  • Longer-term bonds lead gains as U.S. inflation outlook dims
  • Bullard expects inflation to rise as energy shock fades

Treasuries rallied on haven demand after oil tumbled to the lowest level in six years, dimming the outlook for inflation as the Federal Reserve prepares to raise interest rates.

Longer-term Treasuries led gains, pushing the 30-year bond yield down for a second day. Fed Bank of St. Louis President James Bullard said he expects inflation to start rising toward the central bank’s 2 percent goal as the energy shock fades. U.S. equities fell.

“It’s another indication it will be tough to get to 2 percent, which is a benefit to long-end Treasuries,” said Larry Milstein, managing director of government-debt trading at R.W. Pressprich in New York.

Treasury 30-year bond yields dropped by five basis points, or 0.05 percentage point, to 2.96 percent as of 5 p.m. in New York, according to Bloomberg Bond Trader data. The price of the 3 percent note due in November 2045 rose 30/32, or $9.38 per $1,000 face amount, to 100 3/4.

Treasury 10-year note yields fell four basis points to 2.23 percent.

The large oil-price shock is still influencing inflation numbers, Bullard said at a presentation in Muncie, Indiana. The Fed’s preferred price-growth gauge has been below its 2 percent target goal since 2012.

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