Yields fall on trade deal disappointment, curve steepens on dovish Fed

NEW YORK: US Treasury yields fell on Thursday as stocks weakened on disappointment that no specifics on resolving the US-China trade dispute emerged from three days of bilateral meetings, while shorter-dated debt outperformed following Wednesday's dovish Federal Reserve meeting minutes.

US stock futures dipped after China said talks in Beijing had established a "foundation" to resolve differences but gave virtually no details on key issues at stake.

The yield curve steepened after minutes from the Fed's December meeting, released on Wednesday, showed that a range of policymakers said they could be patient about future interest rate increases and a few did not support the central bank's rate increase that month.

"It was definitely a dovish tone to it, which has aided the front end of the market," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.

Benchmark 10-year notes gained 4/32 in price to yield 2.715 percent, down from 2.728 percent late Wednesday. The yield curve between two-year and 10-year notes steepened to 16 basis points, from 13 basis points early on Wednesday.

Two-year notes are the most sensitive to interest rate policy.

A dovish chorus of Fed officials on Wednesday also helped demand for bonds, with policymakers saying they would be cautious about raising interest rates without getting a better handle on how growing risks to an otherwise solid US economic outlook could play out.

A speech by Fed Chairman Jerome Powell later on Thursday will next be evaluated for clues on interest rate policy.

Longer-dated debt underperformed with the Treasury Department due to sell $16 billion in 30-year bonds on Thursday, the final portion of $78 billion in coupon-bearing supply this week.

A $24 billion auction of 10-year notes on Wednesday drew strong demand, following a weak $38 billion sale of three-year notes on Tuesday.