(Bloomberg) -- Treasuries climbed, pushing 10-year yields to the lowest in a year, as oil prices and stocks slid.
With crude slumping, a gauge of the bond market's inflation outlook fell to its lowest in seven years. Treasuries are benefiting from speculation a weaker global and domestic economy will delay an interest-rate increase by the Federal Reserve. Fed Chairwoman Janet Yellen is scheduled to give semi-annual testimony to Congress this week.
U.S. two-year notes erased a decline from Friday, when data showed wages in the world's largest economy rose last month by more than analysts predicted. Traders reduced bets on a Fed rate boost by year-end. The central bank raised its benchmark for the first time in almost a decade in December.
"The market's still quite jittery, which tells you there's very little faith in where things are going with the macro fundamentals," said Gennadiy Goldberg, an interest-rate strategist in New York at TD Securities, one of the 22 primary dealers that trade with the Fed. "All the risk aversion is definitely good for Treasuries."
Yields on 10-year Treasury notes fell three basis points to 1.8% as of 8:45 a.m. in New York. The 2.25% security due in November 2025 was at 104. The yield fell as low as 1.78%. Treasury is set to auction $23 billion of the maturity on Feb. 10.
Two-year yields dropped four basis points to 0.68%, touching the lowest since October.
The difference between yields on nominal 10-year notes and Treasury Inflation Protected Securities, a gauge of expectations for consumer-price growth known as the break-even rate, fell to 1.3%, the lowest since April 2009 based on closing prices.
"There is a de-anchoring of inflation expectations occurring, and this affects how risk-takers are operating in any market that is sensitive to inflation expectations," said Peter Chatwell, head of rates strategy in London at Mizuho International.