NEW YORK: US Treasury yields fell on Thursday as some corporate debt issuance that has weighed on the market passed and as German government bonds held relatively steady, after a dramatic two-and-a-half week selloff.
US government bond yields have been dragged higher by weakening German Bunds, which have been roiled by factors including a rapid unwinding of bets placed on the European Central Bank's debt purchase program.
"Trading is calming down in Europe," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. "Yields still aren't improving, but the frenzy is less, so that helps Treasuries disconnect from the sharp rise in Europe."
Benchmark 10-year note yields fell to 2.26 percent from 2.27 percent late on Wednesday.
Large corporate debt sales from companies including Qualcomm and new US Treasury issuance have also pushed yields higher. The government will sell $16 billion in new 30-year bonds later on Thursday, the final sale of $64 billion in new supply this week.
Higher yields and a steeper yield curve may help draw buyers to the bonds, after strong demand at Wednesday's $24 billion sale of 10-year notes.
Demand for long-dated debt can be uneven, however, and investors may be wary if they think the yield curve may steepen further.
"It's a question in a steepening environment, even though 30s are cheaper, whether people are going to want to pile in right now," said Vogel.
The yield curve between five-year and 30-year bonds steepened to 153 basis points on Thursday. It has risen from 130 basis points at the end of April and from a low of 101 basis points in February.
Data on Thursday also showed US producer prices resumed their downward trend in April as the cost of energy fell and a strong dollar kept underlying inflation pressures benign, supporting views that the Federal Reserve will only raise interest rates later in the year.
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