Treasury yields sink as equities selloff steepens

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Treasurys rose on Tuesday as investors resumed their buying of the perceived safe-havens as oil prices and global equities tumbled.

Yields on benchmark 10-year Treasury notes fell 6 basis points to 2.15 percent, near their session low, after hitting 2.19 percent earlier in the session. Thirty-year Treasury bond yields traded down 5 basis pots at 2.92 percent. Bond prices move in the opposite direction of yields.


Short-dated debt yields, which are tied most closely to monetary policy forecasts, as well, with the yield trading down 5 basis points at 0.70 percent.

The two-year note yield closed at a 2015 high of 0.743 percent on Monday and rose 8 basis points for the month of August, logging its fifth straight monthly increase. That was its longest winning streak since 2006, which was the last time the Federal Reserve raised interest rates.

Fears of a global market slowdown have caused investors to anxiously question if the Federal Reserve will raise interest rates in September.

The Fed's U.S. employment target, one of the key factors in whether or not the it hikes rates next month, has "largely been met," Boston Fed President Eric Rosengren said in prepared remarks on Tuesday, but he noted that the inflation situation isn't "as clear-cut."

Asian shares closed down about 5 percent as manufacturing data that showed China's economy continued to lose momentum on Tuesday.

Read MoreChina manufacturing sector is losing steam, fast

China's official manufacturing purchasing managers' index (PMI) edged down to 49.7 in August from 50 in July, while the final Caixin/Markit manufacturing purchasing managers' index (PMI) came in at 47.3 in August, above a preliminary reading of 47.1 but down from 47.8 in July.

The numbers fueled concerns about China's economic outlook, hurting global stock markets. Those fears saw the S&P 500, the U.S. benchmark stock index, suffer the worst month for more than 3 years in August. U.S. shares closed down nearly 3 percent, with the Dow shedding close to 500 points.

On the domestic data front, the August ISM manufacturing index saw its slowest growth in two years, with a print of 51.1, which was below economists' expectations of 52.6 and a reading of 52.7 last month. It was led by a sharp decline in new orders.

Separately, construction spending data showed a 0.7 percent increase, rising to its highest level in more than seven years, according to the Associated Press.

"Bottom line, U.S. manufacturing is obviously being impacted by what is going on overseas combined with the stronger dollar and weakness in the oil patch, Peter Boockvar, chief market analyst at the Lindsey Group, said in a note.

Read More Stocks end sharply lower in rocky September start

"While the U.S. economy is very internally dependent in terms of growth, it is certainly not immune to softness outside (there will not be decoupling) and we know has been growing only modestly for years anyway because of very low productivity growth and only moderate wage growth."

Investors will be watching for the ISM's non-manufacturing report on Thursday to see how well the services side, the dominant side, of the U.S. economy has handled the global goings on, Boockvar said.

In commodity markets, oil prices resumed their fall on Tuesday, with investors taking profits after Brent and U.S. crude soared more than 8 percent in the previous session.

Brent crude for October delivery fell $5, or 8.9 percent, to $49 a barrel, after climbing 8.2 percent in the previous session. U.S. crude for October delivery closed down 7. percent, at $45.41 a barrel.

—CNBC's Jenny Cosgrave contributed to this report.