NEW YORK: US Treasury prices rose on Thursday as stocks weakened in choppy trading, but pared price gains after a soft 30-year bond auction and as Federal Reserve Chairman Jerome Powell said the US central bank will "substantially" reduce the size of its balance sheet.
Stocks were hurt after China said trade talks in Beijing with the United States had established a "foundation" to resolve differences, but gave virtually no details on key issues at stake.
After clawing their way back into the green, stocks fell again when Powell said the Fed's balance sheet will be "substantially smaller" than it is now, while also reiterating that the Fed can be patient about raising rates.
Powell's comments on the balance sheet came as the Treasury Department auctioned $16 billion in 30-year bonds to weak demand, which sent longer-dated bond yields to session highs.
The ratio of bids to the amount of 30-year bonds offered was 2.19, lower than the 2.31 at the 30-year auction in December.
The yield curve also 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.
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