US benchmark Treasury yields fell to three-month lows on Tuesday, touching the important 4 percent level and promising to drag mortgage rates down and support the housing market.
A speech by Federal Reserve Alan Greenspan offered traders little in the way of clues on the outlook for monetary policy. But other Fed speakers suggested official interest rates could stay low for some time.
That helped the market build on the upward momentum first triggered by a disappointing jobs report last Friday.
"The path of least resistance in the very short-run of this market seems to be forever more expensive levels," said Gregg Cohen, a trader at CIBC World Markets.
"We broke out of a range we'd been in for a few months on Friday and we're following through, bringing people kicking and screaming with it," he added.
Bonds got support from Dallas Fed President Robert McTeer, who told Bloomberg TV he was shocked by December's weak payrolls report.
He added that he expected strong growth with low inflation for some time to come, and his comments reinforced market speculation that the Fed might not hike rates for many months. Fed Board Governor Mark Olson also nudged things along by reiterating the central bank's promise to keep rates low for a "considerable period," a phrase that has supported bond prices since it was inserted into the Fed's policy statement in August.
Yields on the two-year note, the most sensitive to market thinking on official rates, fell to 1.59 percent from 1.66 percent late Monday. Yields have declined from a high of 1.83 percent last week as the market discounted the risk of an early rate hike.
The 10-year Treasury note climbed 19/32 in price, pushing its yield down to 4.02 percent from 4.09 percent. That was a long way from the intraday peak of 4.42 percent touched early last week.
Five-year notes rose 15/32 in price, taking yields to 2.95 percent from 3.05 percent. The 30-year bond added 28/32 in price, nudging its yield to 4.92 percent from 4.98 percent.