10-year yield sinks below 1.9% as oil plunges

Bond traders at CME Group
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U.S. sovereign bond prices gained on Tuesday, pushing yields lower as oil price volatility continued to weigh on investor sentiment, encouraging safe-haven buying of Treasurys.

The U.S. 10-year Treasury note yield, which moves inversely to price, dipped further below 2 percent to 1.8560 percent — close to an April low — after closing at 1.966 percent on Monday.

Meanwhile, the longer-dated 30-year bond yield was also lower at 2.6702 percent after finishing at 2.781 percent in the previous session.

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Oil prices fell on Tuesday, dented by worries about the demand outlook and rising supply, while hopes for a deal between the cartel of oil-producing countries, OPEC, and Russia on output cuts faded.

Brent for April delivery dropped about $1.39 to $32.85 a barrel on Tuesday. The front-month contract for West Texas Intermediate (WTI) settled more than 5 percent lower, below $30 per barrel, after falling 5.9 percent the session before.

Markets will also be digesting key oil earnings, with oil major BP reporting an annual loss of $6.5 billion in 2015, its worst in 20 years.

The U.S. employment report will grab the limelight on Friday. Consensus forecasts suggest that 190,000 jobs were created during January.

That day will also bring the full trade report for December.

Data released on Friday last week suggested U.S. economic growth slowed to an annualized 0.7 percent in the fourth quarter of last year, which also upped the bid for government bonds. This was in line with expectations but down sharply from 2.0 percent growth in the third quarter. Across 2015, the economy grew 2.4 percent, after a similar expansion in 2014.

In a night of surprises, Texas Senator Ted Cruz rode a wave of strong evangelical support to a projected victory over national front-runner Donald Trump in the GOP's Iowa caucus, according to NBC News.

On the other side of the race, Democratic candidate Hillary Clinton appeared to have won the Iowa caucus after her rival, Vermont Sen. Bernie Sanders, dubbed it "a virtual tie."

No major data releases are due Tuesday apart from light vehicle sales data for January.