January 11, 2016, CNBC Online
Oil prices fall to 12-year lows
* Treasury to sell $112 billion of supply this week
* Fed’s Lockhart says there may not be enough new inflation data for March rate hike
(New throughout, updates market action, adds quote)
NEW YORK, Jan 11 (Reuters) – Yields on U.S. Treasuries inched higher in volatile trading on Monday as falling oil prices and concerns over global growth drove stocks lower for much of the day, increasing investor appetite for safe haven U.S. government debt maturing between two and five years.
Oil prices fell 6 percent, reaching new 12-year lows and experiencing their biggest one-day loss since September, suggesting a lack of inflationary pressures.
The drop was driven by China’s blue-chip stocks falling by another 5 percent and overnight interest rates for the yuan outside of China soared to nearly 40 percent, their highest since the launch of the offshore market.
"The down trade in oil spilled over to equities and has given the safe haven market a bit of a boost led by short and intermediate bonds," said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York.
Earlier on the day, Atlanta Federal Reserve President Dennis Lockhart said there may not be enough fresh data on inflation to support another U.S. interest rate hike by March.
Despite falling stocks, appetite for Treasuries was relatively low, with traders and analysts saying the decline in yields last week was overextended.
"Last week Treasuries rallied because Chinese stocks fell and today Chinese stocks fell, but we didn’t rally, suggesting the panic from last week seems to have subsided," said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.
Traders expect moves in the government debt market to be driven by corporate and government supply this week.
The Treasury will sell a total of $112 billion for the week. Among those sales will be an auction of $24 billion of 3-year notes on Tuesday, $21 billion of 10-year notes on Wednesday and $13 billion of 30-year notes on Thursday.
The two-year note was last up 2/32 in price to yield .927 percent, down from 0.948 percent late on Friday.
Benchmark 10-year notes were last down 10/32 in price to yield 2.163 percent, up from 2.131 percent on Friday.
The 30-year bond was last down 25/32 in price to yield 2.961 percent, up from 2.921 percent on Friday.