Yields mixed in choppy trading as ECB, stocks weigh

NEW YORK: US Treasury yields were narrowly mixed on Thursday, generally trading in line with US equities, with investors also focused on the European Central Bank's lower growth and inflation forecasts for next year as well as 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 the market started moving in tandem with stocks.

"The market, over the past month or so, has been highly sensitive to what's going on in stocks," said Tom Simons, money market economist, at Jefferies in New York.

"There's no reason why that should change. Now, we're just kind of drifting until we get the next set of macro headlines," he added.

The ECB was the market's focus in the US morning session.

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

A US 30-year bond auction on Thursday saw decent demand, spurring some buying in the afternoon.

The bond picked up a yield of 3.165 percent, compared with 3.167 percent at the bid deadline. Bids totaled $36.9 billion for a 2.31 bid-to-cover ratio, better than the weak 2.06 from the November refunding.

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.

In late trading, benchmark US 10-year note yields were at 2.911 percent, from 2.906 percent late on Wednesday.

US 30-year bond yields were up at 3.161 percent , from 3.148 percent on Wednesday.

On the short end of the curve, US 2-year yields slipped to 2.757 percent, compared with Wednesday's 2.77 percent.