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US Treasurys hold higher after sale; oil eyed

U.S. Treasury prices were higher on Tuesday, after a sale of three-year notes and as crude oil prices dipped beelow per barrel.

The Treasury Department auctioned $24 billion in three-year notes at a high yield of 1.174 percent. The bid-to-cover ratio, an indicator of demand, was 2.94. Indirect bidders, which include major central banks, were awarded 62.8 percent. Direct bidders, which include domestic money managers, brought 9.4 percent.

"Bottom line, the obvious key for the short end of the curve this year is whether the Fed hikes rates again. Their models will tell them to raise again as the labor market tightens and the Fed holds out hope that oil prices stop going down and thus leads to a rise in headline inflation (core inflation should remain sticky)," Peter Boockvar, chief market analyst at The Lindsey Group, said in a note after the auction.

Benchmark 10-year notes rose to yield 2.1129 percent, down from a closing yield of 2.158 percent. Bond prices move inversely to yields.

Thirty-year bonds yielded 2.8928 percent, down from 2.957 percent at the close. Three-year notes yielded 1.1599 after the sale.

Symbol
Yield
 
Change
US 3-MO
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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"Global investors still remain firmly in risk-averse mode in the near-term as the market focuses switches back to the ongoing slide in the price of crude oil towards $30/barrel. The price of copper has also fallen to new cyclical lows reinforcing investor concerns over the outlook for global growth," Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi, said in a report on Tuesday.

U.S. oil briefly dipped below $30 a barrel, hitting a new 12-year low.

Barclays Research said on Tuesday that it had lowered its 2016 average forecasts for both Brent and WTI to $37 in 2016, citing the marked deterioration in the commodities market environment since the start of the year.

$24B auction

On the data front, the November JOLTS (job openings) report came in at 5.431 million. Other data due Tuesday include this month's Federal Reserve's Beige Book, which tracks current economic conditions. There will also be the Treasury budget for December, plus the weekly MBA mortgage index and crude oil inventories.

In addition, Richmond Federal Reserve President Jeffrey Lacker will speak on 2016's economic outlook in Columbia, South Carolina on Tuesday. The event will begin at 3 p.m. ET.

Further turmoil in Chinese stocks has continued to hit a broad range of assets across the globe this year. Chinese markets wavered between gains and losses on Tuesday, after plunging sharply on Monday. Before trade started, the Chinese central bank set the yuan mid-point fix at 6.5628 against the dollar, similar to Monday's fix of 6.5626.