NEW YORK: US Treasury debt yields rose on Friday as risk appetite improved with the rebound in Deutsche Bank share prices and the release of generally solid US economic data that keeps the Federal Reserve on track to raise interest rates in December.
US 30-year bond yields, which move inversely to prices, hit a one-week high, while US two-year notes rebounded from six-week lows to trade nearly two basis points higher on the day.
A report that Deutsche Bank was close to a cut-price settlement with US authorities over the sale of toxic mortgage bonds helped fuel a recovery in its shares, and its chief executive said the group remained stable.
The German lender's shares ended up 6.4 percent in Europe, while its American Depositary Receipts (ADRs) were up 15 percent, after plunging 7 percent the previous session.
"Deutsche Bank closed the week on a strong note, but its struggles will leave an impact on fixed income for at least the first two weeks of October," said Jim Vogel, interest rate strategist, at FTN Financial in Memphis.
Deutsche Bank, which has prompted a bid for Treasuries for most of this week, has been in the midst of a $14 billion legal battle with the US government in connection with the bank's issuance and underwriting of mortgage-backed securities.
But even though Deutsche Bank shares posted sharp gains, things could turn quickly, analysts said.
"Obviously, people are afraid of what could possibly happen over the weekend," said Tom di Galoma, managing director at Seaport Global in New York. "So this is becoming a reality for a lot of people. You just don't know how bad it could get for Deutsche."
On the US economic front, analysts said the data, while not stellar, was a step in the right direction. US consumer spending fell in August, but core inflation showed an uptick.
In addition, the manufacturing index for the US Midwest rose to 54.2 in September from 51.5 percent in August.
In late trading, US benchmark 10-year Treasury notes were down 12/32 in price for a yield of 1.597 percent, up from 1.556 percent late on Thursday.
US yields, however, remained on a downtrend, having fallen in seven of the last nine trading sessions given global geopolitical tensions and political uncertainty arising from the upcoming US elections.
US 30-year bonds fell one point in price, yielding 2.319 percent, up from Thursday's 2.274 percent.
On the front end of the curve, US two-year notes were down 1/32 for a yield of 0.761 percent, up from 0.746 percent on Thursday. Two-year yields rose from six-week lows of 0.718 percent hit earlier during the European session.
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