US yields budge little as market settles into tight range

NEW YORK: US Treasury yields were little changed on Tuesday as the bond market settled into a tight trading range in the aftermath of wild swings stemming from worries about inflation and a rout across global equities.

Geopolitical risks and rising government debt also contributed to recent market volatility that propelled the benchmark 10-year Treasury yield to a 7-1/2 year peak last week.

"Following the extraordinary volatility in both stocks and bonds, we are seeing a bit of a calming here as traders are looking for new ranges," said John Canavan, market strategist at Stone & McCarthy Research Associates in New York.

Investors scaled back bearish bets on longer-dated US government debt this week, suggesting less selling pressure on Treasuries, according to a survey released by J.P. Morgan Securities on Tuesday.

On moderate trading volume, the 10-year Treasury yield was down marginally at 3.160 percent. A week ago, it reached a seven-plus year high at 3.261 percent.

The 30-year yield slipped half a basis point at 3.336 percent, which was below the four-year peak at 3.446 percent set last week.

Short-to-medium Treasury yields were slightly higher, with the two-year yield at 2.870 percent.

While monitoring Brexit, Italy and the Middle East, traders did not shift their bond positions based on the latest developments.

On Monday, Italy approved a 2019 government budget that would raise its deficit, paving the way for a showdown with the European Commission over compliance with European Union rules.

British Prime Minister Theresa May is hoping for an agreement with the EU for her country to leave the economic bloc at a meeting on Wednesday.

An international outcry has ensued against Saudi Arabia in the wake of the disappearance of columnist Jamal Khashoggi, a critic of the Saudi crown prince.

Meanwhile, domestic data signaled the US economy likely grew at a solid pace in the third quarter. The Labor Department said domestic job openings grew to 7.14 million in August, the highest on record, while the Federal Reserve Board said industrial production rose 0.3 percent last month, slightly stronger than an expected 0.2 percent gain.

Against this upbeat economic backdrop, traders await possible clues on the Fed's stance on future hikes when it releases the minutes of its September policy meeting at 2 p.m. (1800 GMT) on Wednesday.

Growing US government debt, which is expected to increase in the coming decade to fund a rising federal deficit, is also a long-term driver of US yields.

The Treasury Department debuted a two-month bill issue worth $25 billion to solid demand. It will sell $5 billion in 30-year Treasury Inflation Protected Securities on Thursday.