US Treasury yields climbed on Thursday as risk appetite improved and geopolitical tensions eased after President Donald Trump said a possible attack on Syria may not be imminent, contrary to what he signalled on Wednesday. Over the last couple of sessions, the US bond market has traded off political and international headlines, temporarily superseding economic data. Investors have kept trading ranges fairly constrained given the overall market uncertainty, even though the overall trend for yields remained higher.
Referring to his threatened strike on Syria in response to a suspected poison gas attack on a rebel enclave, Trump tweeted on Thursday, "Never said when an attack on Syria would take place. Could be very soon or not so soon at all!" His comment pushed benchmark US 10-year note yields to a one-week high after a lacklustre auction of the security on Wednesday. Trump later said he was holding meetings on Thursday on Syria and expected to make decisions "fairly soon."
"There is less immediate concern about military strikes or action in Syria," said Jim Vogel, interest rates strategist at FTN Financial in Memphis, Tennessee. "It doesn't move it to the back-burner, but it allows you to look around and trade other things and that gives room for rates to rise just a little bit from their sort of cramped or compressed levels," he added.
Yields were also boosted by data showing US initial jobless claims dropped 9,000 to a seasonally adjusted 233,000 for the week ended April 7, reflecting continued improvement in the labour market. In afternoon trading, the US 10-year yields rose to 2.833 percent, from 2.79 percent late on Wednesday. US 30-year yields climbed to 3.04 percent, from Wednesday's 3.005 percent.
On the front end of the curve, US 2-year yields were up at 2.348 percent, compared with 2.311 percent on Wednesday. The US Treasury on Thursday also auctioned $13 billion in reopened 30-year bonds, a day after the 10-year note sale drew soft demand from so-called "indirect bidders," which include fund managers and foreign central banks.
The bond picked up a high yield of 3.044 percent, just below the expected level before the bid deadline. The bid-to-cover ratio, a gauge of demand, was 2.41, slightly lower than the average for auctions of the same maturity. "The bond auction was a humdrum event as the jump in outright yield levels brought out buyers via a strong direct channel bid," said Aaron Kohli, director of interest rates strategy at BMO Capital Markets in New York.
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