US Treasury yields were little changed on Tuesday in choppy trading as optimism grew that US President Donald Trump may back down from proposed steel and aluminium tariffs that have prompted concerns about a global trade war. Top US Republican politicians, including House of Representatives Speaker Paul Ryan, on Monday urged Trump not to go ahead with tariffs on foreign imports of steel and aluminium.
Even though the president said he would not back down, he suggested Canada and Mexico could be exempted if a new North American Free Trade Agreement (NAFTA) was reached, which many market participants see as the main motivation behind the plan. "It does seem as though Trump has laid out the fact that he's using these tariffs as a negotiating tactic," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.
Benchmark 10-year note yields were last at 2.879 percent, unchanged on the day. The potential for easing tensions between the United States and North Korea was seen helping reduce demand for safe-haven US bonds. Trump said on Tuesday he saw "possible progress" in denuclearization efforts with North Korea after South Korea said Pyongyang would be willing to meet with the United States and suspend nuclear tests while talks proceed.
CVS Health Corp's $40 billion, nine-part corporate bond sale weighed on bonds earlier on Tuesday. "There was some concerns in the early morning about this big deal with CVS going through and potential hedging needs," said John Herrmann, a director in rates strategies at MUFG Securities Americas in New York.
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