Yields slip as US stocks fall in holiday-shortened week

NEW YORK: US Treasury yields drifted lower from four-week highs on Wednesday, as Wall Street shares lost steam in a holiday-shortened week and investors got back in the market after a recent sell-off.

Financial markets are closed on Friday for the Good Friday holiday.

"Equities are a little bit weaker and that has helped Treasuries," said Justin Lederer, Treasury trader at Cantor Fitzgerald in New York. "People also just found levels that they were willing to step in and are semi-attractive because we have erased the entire move that started in March."

Since hitting a more than one-year low in late March after the Federal Reserve indicated that it will hold off raising interest rates for now, benchmark US 10-year yields have risen roughly 27 basis points.

Earlier in the session, US yields benefited from upbeat Chinese data that boosted risk appetite and eased concerns about a slowdown in the world's second largest economy.

Data showed China's economy grew at a steady 6.4 percent pace in the first quarter, as industrial production jumped sharply and consumer demand showed signs of improvement.

"There was mostly exuberance earlier on the recent China data and its overall impact on global growth," said Subadra Rajappa, head of US rates strategy, at Societe Generale in New York.

In morning trading, US 10-year note yields slipped to 2.59%, down from 2.594% late on Tuesday.

Yields on US 30-year bonds were also down at 2.991% , from 2.993% on Tuesday.

On the short end of the curve, US 2-year yields fell to 2.404%, compared with Tuesday's 2.416%.

US yields earlier extended their rise after data showed the US trade deficit fell to an eight-month low in February as imports from China plunged.

Overall though, there has been optimism about US economic prospects and that should push yields higher, analysts said.

"We have always argued that Treasury yields are rich compared to fundamentals and now I think there's a little bit of a catch-up going on," said Societe Generale's Rajappa.

"Treasury yields are trading in line more with fundamentals. There's probably also a lot of easing priced in the market," she added.