Yields mixed in narrow ranges as ECB weighs

NEW YORK: US Treasury yields were mixed on Thursday in choppy trading within narrow ranges, as investors digested the European Central bank's reduced growth and inflation forecasts for next year along with a warning of economic risks to the region.

German 10-year government bond yields fell more than a basis point as ECB President Mario Draghi spoke and was

last at 0.264 percent.

Other high-grade euro zone bond yields also fell 1-2 basis points in the aftermath of Draghi's comments.

US Treasury yields initially moved in line with German Bunds, before long-dated debt yields inched higher as US stocks rose.

"The market at the moment is focused on the ECB and we're sort of moving in line with Bunds for the most part," said Gennadiy Goldberg, interest rates strategist at TD Securities in New York.

In a news conference, Draghi said the balance of risks on the growth outlook was moving to the downside due to "geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets, and financial market volatility."

The ECB also trimmed its regional growth projection to 1.7 percent and inflation forecast to 1.7 percent for 2019, further spurring buying in both the US and European bond markets

US yields on Thursday were also pressured by a steeper-than-expected drop in November's US import prices, which followed Wednesday's tame consumer price reading. Both reports backed a growing view that the Federal Reserve could slow the pace of interest rate hikes.

Data showed US import prices dropped 1.6 percent last month, the biggest decline since August 2015, after an unrevised 0.5 percent increase in October.

"This decline extended the downward trend for this core import price measure that has now gone on since May, and prices have been soft in most of the major related subcategories," said Daniel Silver, economist at JP Morgan in New York.

"It is likely that the recent dollar appreciation has been weighing on imported inflation and this weakening in import prices also could weigh on domestic inflation," he added.

In mid-morning trading, benchmark US 10-year note yields were at 2.905 percent from 2.906 percent late on Wednesday.

US 30-year bond yields were up at 3.153 percent , from 3.148 percent on Wednesday.

On the short end of the curve, US 2-year yields slipped as

well to 2.762 percent, compared with Wednesday's 2.77 percent .

Investors are looking toward the $16 billion US 30-year bond auction later in the session, which could see lackluster demand after a soft 10-year note sale on Wednesday and given that 30-year prices have not fallen enough to attract attention.