Yields decline amid fears of market bubble in stocks
- Tech-fueled stock rally loses momentum amid market correction fears
- U.S. government shutdown leaves bond market directionless
- Investors await ADP report and Treasury's quarterly refunding plans
By Davide Barbuscia
U.S. Treasury yields declined on Tuesday amid a broader risk-off tone in financial markets due to concerns over stretched valuations in stocks and corporate bonds that could eventually lead to a market correction.
A tech-fueled stock rally lost momentum on Tuesday, as top Wall Street executives including the CEOs of Morgan Stanley MS.N and Goldman Sachs GS.N cautioned that equity markets could be heading toward a drawdown. The S&P 500 
SPX was down 1.2% in early trade.
Meanwhile, the economic calendar was empty due to the U.S.
This left the bond market directionless, except for the safe-haven demand spurred by fears of a market bubble in stocks.
"If there's a big capitulation in the stock market, where do those funds go? Clearly they could go into Treasuries, at least initially," said Jay Menozzi, chief investment officer and senior portfolio manager at Easterly Orange.
"The stock market one day feels very euphoric and the next day very scary, that alone is probably an indication that it's becoming a bit unstable, at least in terms of the outlook," he added.
Benchmark 10-year yields 
US10Y were last at 4.091%, about two basis points lower on the day, while two-year yields (US2YT=RR) were at 3.579%, about three basis points lower. Further out in the curve, 30-year yields (US30YT=RR) declined to 4.679% from 4.694% on Monday.
Because of the government shutdown, a closely-watched monthly jobs report from the Bureau of Labor Statistics will not be available on Friday, as previously scheduled.
Investors will therefore rely on the ADP employment report, an independent survey that is due on Wednesday, to assess the health of the labor market and the potential for additional interest rate cuts by the Federal Reserve at its next policy meeting in December.
Also on deck on Wednesday, the Treasury Department will release details of its quarterly refunding plans, which bond investors will watch closely to assess how the government plans to finance its deficits.