US longer maturity bond prices up

Longer maturity US Treasuries prices rose on Tuesday as a two-day slide in oil prices eased inflation fears. But the bid for short-term US government debt, typically seen as a safe haven when investors shun riskier assets, was depressed by gains in US stocks and the view that the Federal Reserve would continue to take steps to keep credit markets functioning.
The yield curve flattened, narrowing the gap of 10-year yields over 2-year yields to about 143 basis points from 146 basis points on Monday. "Prices are a little lower at the front end but there's a better bid farther out on the yield curve," said John Canavan, analyst at Stone and McCarthy Research Associates in Princeton, New Jersey. "A $10 pullback in oil over two days is easing inflation fears. It's a small impact, but it's there."
US crude oil slipped below $136 per barrel, from last week's record peak above $145. Long-dated Treasuries are especially sensitive to the inflation outlook because inflation erodes bond values over time. Federal Reserve Chairman Ben Bernanke said the Fed might extend emergency lending for big Wall Street investment banks beyond year-end while it sought to restore financial market stability.
Two-year note prices, which move inversely to their yields, were down 2/32 for a yield of 2.48 percent, versus 2.44 percent late Monday. Remarks by the director of the top regulator of mortgage finance providers Fannie Mae and Freddie Mac asserting that an accounting rule change should not drive a capital change at government-sponsored entities like Fannie and Freddie lifted the hard-hit shares of those firms, crimping the bid for government debt.
After tumbling on Monday, shares of both Freddie Mac and Fannie Mae jumped more than 11 percent on Tuesday. A real estate group reported that pending sales of previously owned homes plummeted 4.7 percent in May, more than economists had expected and the latest reminder that the economy's current troubles originated in the housing market. But Treasuries barely budged.
The benchmark 10-year Treasury note's price, which moves inversely to its yield, was up 4/32, for a yield of 3.89 percent, from 3.91 percent late on Monday. The 30-year bond was up 12/32 in price, its yield easing to 4.46 percent from 4.49 percent late on Monday.