U.S. long-dated Treasury yields fell to their lowest level in nearly two weeks on Wednesday on growing anticipation of a short-term interest rate hike by the Federal Reserve.
Weakness in U.S. stocks and oil prices also helped fuel demand for the Treasury bonds.
Yields on 30-year Treasury bonds hit 3.03 percent, their lowest level since July 9 and also showed the biggest decline on the day of about four basis points. The benchmark 10-year yields also hit their lowest since that date at 2.3 percent.
Analysts said the flattening of the yield curve, which showed investors pushing yields on long-dated bonds lower and short-dated bonds slightly higher, was a reaction to increased expectations that the Fed could be hiking rates soon.
"What you're seeing is the market getting used to the greater probability of a September rate hike," said Anthony Valeri, fixed-income strategist at LPL Financial in San Diego.
Fed rate hikes are expected to hurt bond prices, which move inversely to yields. Short-dated notes are considered the most vulnerable. Three-year notes were last down 1/32 in price to yield 1.08 percent, from a yield of 1.06 percent late Tuesday.
The Fed will meet next week. Fed Chair Janet Yellen repeated the view last week that the central bank would likely raise rates this year.
Analysts also said weaker oil prices and U.S. share prices boosted demand for 30-year bonds. Analysts noted how weaker oil prices signal lower inflation, which is beneficial for long-dated bonds since inflation tends to erode the value of interest rate payouts.
"Oil coming down again means headline inflation will be weaker, which leads people to buy longer-dated bonds, which are very sensitive to inflation pressures," said David Hoffman, co-head of fixed income at Brandywine Global in Philadelphia.
Weakness in U.S. share prices in response to disappointing corporate reports from technology giants Apple and Microsoft also helped drive demand for long-dated bonds, analysts said.
U.S. 30-year yields were last up 24/32 in price to yield 3.04 percent, from a yield of 3.08 percent late Tuesday. Benchmark 10-year Treasury notes were last up 4/32 to yield 2.33 percent, from a yield of 2.34 percent late Tuesday.