Treasuries advanced on Tuesday as oil prices retreated to their lowest levels in more than a month, easing concerns about persistent inflation. The move came ahead of Wednesday's release of the May consumer price index, a key data point for Federal Reserve policy.
The decline in crude oil, a major driver of headline inflation, has provided some relief to bond markets. Lower energy costs are seen as helping to cool price pressures, potentially giving the Fed more room to ease monetary policy later this year.
Benchmark 10-year note yields fell several basis points in early trading, while 2-year yields also declined. The rally was broad-based across the curve, with longer-dated maturities seeing the largest price gains.
Investor attention now turns to the May CPI report, which is expected to show a moderation in year-over-year inflation. Any upside surprise could reverse the recent bond market optimism, while a soft reading may fuel expectations for rate cuts.
The auction of $58 billion in 3-year notes was closely watched, with demand from foreign buyers and domestic investors remaining solid. Market participants are also awaiting the 10-year note sale later this week.