NEW YORK: US Treasury yields rose on Friday, with the 10-year yield hovering near a one-week high as traders pared safe-haven bond positions on a recovery in Wall Street stocks and hopes for reduced tension between Italy and the European Commission.
Major US stock indexes rose as strong corporate earnings offset worries about rising borrowing costs, US-China trade tensions and strained relations between United States and Saudi Arabia.
On Thursday, Wall Street share prices tumbled partly on disappointing results from industrial companies. Kevin Giddis, head of fixed income capital markets with Raymond James in Memphis, Tennessee, said that despite Friday's rebound on Wall Street, investors remain on edge which could spur more bond buying in the near future.
"The story of fear seems to be in place right now as investors fear not only interest rates and the Fed, they are now fearing forward earnings," said Kevin Giddis, head of fixed income capital markets with Raymond James in Memphis, Tennessee.
Yields on Italian government debt fell after European Economic Affairs Commissioner Pierre Moscovici said he wanted to reduce tensions with Italy over the country's contentious budget plans. The drop in Italian yields helped raise yields on US and German debt.
At 11:25 a.m. EDT (1525 GMT), benchmark 10-year Treasury yield yield was 3.196 percent, up 2 basis point from Thursday when it reached a one-week peak of 3.179 percent. Last week, it reached a 7-1/2 year peak of 3.261 percent.
The Dow was up 0.49 percent and the S&P 500 was up 0.59 percent.
The Treasury market was roiled this week after the Federal Reserve released minutes on its Sept. 25-26 policy meeting. Central bankers raised borrowing costs a quarter point, and analysts said some traders dumped interest rate futures after the minutes suggested some policy makers were open to raising short-term interest rates above the "neutral" level of 3 percent.
Technical indicators suggest Treasuries are oversold, but the market faces supply pressure next week due to a planned auction of a combined $108 billion in two-year, five-year and seven-year fixed-rate US government debt.
"What I do know is that the bond market is somewhat oversold, but it may not find many buyers until more data is released, a geopolitical event gets our attention, or the Fed changes its view on forward monetary policy," Giddis said.
Earlier Friday, the National Association of Realtors said US home resales fell in September for a sixth straight months.
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