Treasury yields pare gains

US Treasury yields rose on Thursday as a range of reports indicated continued economic growth, then pared the gains in afternoon trading.

The benchmark 10-year yield was 1.7 basis points higher at 1.7982% in afternoon trading, reflecting increased investor appetite for risk, after rising as much as 4.1 basis points in the morning.

Analysts attributed the yield increase to factors like a fall in weekly jobless claims and a decline in the US trade deficit, which suggested trade could contribute to economic growth in the fourth quarter.

In addition, oil prices rose on Thursday ahead of an OPEC meeting expected to lead to deeper output cuts.

"All the factors are laying out better-than-expected economic growth," said Stan Shipley, research analyst at Evercore ISI. "Everything is going one way here," he said.

Speaking in Washington in the early afternoon US President Donald Trump did threaten trade action with countries that are not contributing enough to their defense.

But overall no news offered an obvious reason for the later decline, said Lou Brien, market strategist for DRW Trading, making it likely to indicate trade flows as investors repositioning bond portfolios.

There are "not the obvious suspects we can look at" to explain the lower yields, he said.

The two-year yield typically moves in step with interest rate expectations. On Thursday afternoon it was up less than a

basis point to 1.5863%.

Thursday's trading marked the second day of higher yields after relatively positive comments by US President Donald Trump raised hopes of a trade agreement with China, the most unpredictable factor in the market, and Wall Street's main indexes also rose.

The Commerce Department said the trade deficit tumbled 7.6% to $47.2 billion, the smallest since May 2018, as both imports and exports of goods declined. It was the second straight monthly fall in the trade bill and the percent drop was the biggest since January.

While Washington and Beijing are working on a "phase one" trade deal, the United States has ratcheted up tensions with other trade partners.

Despite the trade tensions there are few signs they are affecting the labor market. In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 203,000 for the week ended Nov. 30, the lowest since mid-April.