2017.06.2118:22:00UTC+00Treasury Yields Slump as Oil Prices Slide

The yield on the long bond slid to a seven-month trough as crude prices fell, increasing pressure on the Federal Reserve that shrugged off weak inflation data to open doors for additional monetary tightening this year.

The 30-year bond yield dropped one basis point (bps) to 2.724 percent, its lowest since November 8, the day when Republican Donald Trump won the U.S. presidential election. Meanwhile, the yield on the two-year Treasury note advanced 0.4 bps to 1.352 percent, while the 10-year benchmark Treasury note advanced 0.3 bps to 2.156 percent.

In morning trade, yields have rallied following the release of U.S. existing home sales data, which showed a 1.1 percent gain in May, denoting an annual pace of 5.62 million, topping estimates. The data gave a stronger argument for the Fed's case that the weaker-than-projected data was only temporary and that conditions are still viable for a rate hike and a trimming of its balance sheet.

A retreat in oil prices drove yields down in the afternoon, after the U.S. EIA's data showed that weekly domestic output has increased by 20, 000 barrels, bringing daily production to 9.35 million barrels despite a decline in crude inventories. The lower energy prices can hold back inflation outlook, which is bullish for Treasuries as they can leave the value of the debt's fixed returns intact.