US Treasury yields rose on Thursday with the benchmark 10-year yield reaching near three-week highs as better-than-expected economic data and hopes for progress in US-China trade talks diminished safe-haven demand for government debt.
US Treasury Secretary Steven Mnuchin had considered removing some or all tariffs on Chinese imports in an effort to resolve the stalemate between Beijing and the Trump administration, the Wall Street Journal said, citing people familiar with the internal deliberations.
A Treasury spokesperson told CNBC that Mnuchin had not made any such recommendations, causing Treasury yields to retreat from their session peaks. This week's offering of corporate bonds put some upward pressure on Treasury yields, as dealers sold Treasuries to lock in borrowing costs on debt they underwrote and investors reduced their US government debt holdings to make room for the corporate supply, traders and analysts said.
On the other hand, the historically long government shutdown and uncertainty about Brexit have kept a lid on Treasury yields, keeping them in a tight trading range. "There are still a lot of geopolitic risks out there," said Wen Lu, US rates strategist at TD Securities in New York. "Rates are going to stay in a range for the next couple of weeks."
The yield on benchmark 10-year Treasury notes hit a near three-week peak of 2.761 percent. It was last 2.749 percent, 2.0 basis points higher than Wednesday's close. Bond yields fell earlier Wednesday along with weaker US stock index futures after US lawmakers introduced bills on Wednesday that would ban the sale of US computer chips or other components to Chinese firms that violate US sanctions or export control laws.
This legislative move had pared optimism about Washington and Beijing resolving their trade issues. The initial safe-haven demand for Treasuries faded following an unexpected fall in domestic first-time filings for unemployment benefits last week and a stronger-than-forecast increase in early January on a measure of Mid-Atlantic business activity from the Philadelphia Federal Reserve.
The US economy remains "very strong" with inflation contained, Fed Governor Randal Quarles said. The 10-year Treasury yield hit a near one-year low of 2.543 percent almost two weeks ago on concerns about weakening economic growth and bets the US central bank may not raise interest rates in 2019. On the supply front, companies have raised $21.4 billion through investment-grade debt sales this week, according to IFR. The Treasury Department sold $13 billion in 10-year Treasury Inflation Protected Securities to solid investor demand.