US Treasury yields fell to three-week lows on concerns that scandals embroiling US President Donald Trump would delay his bid to cut taxes and regulation and push through infrastructure spending, which boosted demand for safe-haven bonds. Reports that Trump in February asked then-FBI Director James Comey to end a probe into the president's former national security adviser have stirred speculation that obstruction of justice charges could be laid against Trump.
The White House has been in turmoil since last week when Trump fired Comey and then discussed sensitive national security information during a meeting with Russian officials.
The scandals are seen as distracting lawmakers from passing legislation that investors had hoped would help boost economic growth. "The more focus there is on the headlines, the less there is on the stuff that the market really cares about, which is fiscal stimulus, tax reform, regulatory reform, any of those issues," said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York.
Benchmark 10-year notes gained 20/32 in price to yield 2.26 percent, the lowest level since April 25 and down from 2.33 percent late on Tuesday. The yield curve between two-year notes and 10-year notes flattened below 100 basis points for the first time since May 3. Bonds have also been boosted in recent days by weakening US economic data, which has raised new doubts over whether the Federal Reserve is likely to raise rates an additional two times this year.
Futures traders are pricing in a 69 percent chance of a June hike, down from 88 percent a week ago, according to CME Group's FedWatch Tool. Traders see only a 48 percent chance of the Fed raising rates two or more times by the end of the year, even though Fed officials have said two more rate hikes are likely in 2017.