US yields inch up, but range-bound amid trade, Brexit uncertainty

NEW YORK: US Treasury yields were little changed to slightly higher on Thursday, but confined within narrow ranges, amid uncertainty regarding trade talks between the United States and China after a report said a deal is unlikely to happen this month, but in April.

US long-dated yields were the most affected by ongoing global tension, falling in seven of the last nine sessions.

Worries about Britain's exit from the European Union have also added to the downward pressure on rates in the last few weeks.

"When you look at Trump and Xi, it's clear that both parties want to make a trade deal here," said Brian Giuliano, vice president, portfolio management, at Brandywine Global Investment Management in Philadelphia, referring to US President Donald Trump and Chinese President Xi Jinping.

"But market sentiment has shifted on trade," he added, noting that reports about a trade agreement delay is a big deal to Treasury investors.

"A year ago, trade policy was exacerbating volatility. Today, trade policy uncertainty is now one of the key drivers of volatility in the market," Giuliano said.

Bloomberg on Thursday, citing unnamed sources, reported that a meeting between Trump and Xi to resolve the ongoing trade war conflict will not take place this month and is more likely to occur in April at the earliest.

Aside from China, investors are closely watching Brexit as well.

The British parliament is due to vote on Thursday on seeking a last-minute Brexit delay, while Prime Minister Theresa May piled renewed pressure on reluctant lawmakers to back her EU divorce deal at the third time of asking.

"With no deep clarity as to the length of any such delay, we'd offer that the most growth-negative outcome would be the possibility of a series of rolling short-term extensions of a few months," said BMO Capital Markets in a research note.

"This would serve to maintain high levels of uncertainty and perpetuate Brexit fatigue."

In late morning trading, US 10-year note yields edged up to 2.621 percent from 2.610 percent late on Wednesday.

US 30-year bond yields were up at 3.017 percent from 3.01 percent on Wednesday.

On the short end of the curve, US 2-year yields inched up to 2.456 percent, compared with Wednesday's 2.453 percent .

Data showing a rise in US weekly jobless claims and a sharp decline in new home sales had minimal impact on Treasuries, but they do support market expectations that the Federal Reserve will hold interest rates throughout the year.