US Treasury debt prices fell on Tuesday as a rally in Wall Street stocks and competing corporate bond supply led by Apple trimmed safe-haven demand for bonds, lifting benchmark yields further from their near 3-1/2-year lows set last week. US and other major equity markets advanced following a deal among four of the world's biggest oil producers to freeze output. The agreement offered some foundation for possible future reduction in a bid to shore up crude prices.
The oil market, however, turned negative as news of the output freeze fell short of some traders' bets on an immediate production cut. US crude futures were down 1 percent at $29.07 a barrel in late trading. This limited the losses in Treasuries, underscoring nagging worries among investors about the energy supply glut and a wobbly global economy, as well as concerns about whether major central banks have enough tools to stimulate inflation and consumer demand.
Tuesday's weaker-than-forecast data on business activity in New York state and home builder sentiment stoked worries about a slowing US economic expansion. Some analysts downplayed the day's bond losses as they awaited Wednesday's minutes on the Federal Reserve's January policy meeting and consumer inflation data due on Friday. "It's more market volatility that we have seen. I would say it's more of a sideway move today," said Subadra Rajappa, head of US rates strategy at SG Corporate & Investment Banking in New York.
Benchmark 10-year Treasury notes were down 7/32 in price for a yield of 1.777 percent, up 3 basis points from late on Friday. US financial markets were closed on Monday for the Presidents Day holiday. Last week, the 10-year yield fell to 1.53 percent, its lowest since September 2012, while the 30-year bond yield hit 2.38 percent, its lowest in a year.
The 30-year bond last traded 24/32 lower in price, yielding 2.641 percent, up 4 basis points from Friday. Longer-dated Treasuries prices touched session lows around the time when Apple launched a $12 billion multi-part debt offering mid-afternoon Tuesday. The yield spread between 10-year and 2-year notes widened to 1.06 percentage point. Last Thursday, it shrank less to less than 1 point, its tightest since November 2007, reflecting an outlook for weak economic growth and low inflation.