Safe-haven US Treasury yields dipped on Thursday on concerns that weakness in Chinese equities could have negative implications for global economic growth and after a drop in oil prices suggested a lack of inflationary pressures. China allowed the biggest fall in the yuan in five months, and Shanghai stocks were halted for the second time this week after another brutal selloff tripped a newly imposed circuit breaker. The volatility boosted prices on safe-haven Treasuries, which move inversely to yields.
Analysts said that, while worries faded somewhat in late morning trading and led Treasury yields to climb modestly, a resurgence of concerns over China's economic stability led yields to fall again. Yields remained above multi-week lows hit in early morning trading, however. Benchmark 10-year Treasury yields hit 2.119 percent in early trading to mark their lowest in 10 weeks, while all other yields on Treasuries maturing between two and 30 years hit over three-week lows.
"There is a lot of fear about China, and it has been the driver of markets this entire week," said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York. "Treasuries have definitely benefited from it." Brent crude prices settled lower on the day and were not far from near 12-year lows touched earlier. The weakness in oil also pushed long-dated yields lower, said Ninh Chung, head of portfolio management for SVB Asset Management in San Francisco. Prices on long-dated bonds tend to fall on signs of greater inflationary pressures since inflation erodes those bonds' interest payouts.
US 10-year Treasury notes were last up 8/32 in price to yield 2.149 percent, from late Wednesday's yield of 2.177 percent. US 30-year Treasury bonds were last up 9/32 in price to yield 2.924 percent, from a yield of 2.940 percent late Wednesday. The latest 30-year yield was up from the session low of 2.885 percent hit in early trading. US two-year notes were last up 2/32 in price to yield 0.952 percent, from a yield of 0.984 percent late Wednesday and a session low of 0.936 percent.
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