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NEW YORK: US Treasury yields edged higher in choppy trading on Tuesday on prospects for a resolution concerning Britain's exit from the European Union despite being rejected by British lawmakers.

Yields initially fell after the deal's rejection by the UK parliament, but came right back up as market participants pored over the headlines.

US 30-year yields traded higher for most of the session, hitting a four-week high and advancing for a second straight session.

In a widely expected outcome, UK lawmakers turned down Prime Minister Theresa May's Brexit deal by 232 votes. That could open several scenarios, ranging from resurrecting her deal, leaving the EU with no deal at all, or holding another referendum that could halt Brexit altogether.

"The 232-vote difference was close enough to what people were expecting and so that gives the prime minister's government some negotiating room to make another step forward for a resolution," said Jim Vogel, interest rates strategist, at FTN Financial in Memphis, Tennessee.

He added that Treasuries have become "increasingly sensitive" to stories that have no apparent end, such as Brexit and the US government shutdown.

In afternoon trading, US 10-year note yields were up slightly at 2.713 percent, from 2.71 percent late Monday.

Stan Shipley, fixed income strategist at Evercore ISI in New York said he does not see much upside in US 10-year Treasury prices as he expects yields to rise from current levels.

"Based on inflation expectations, the 10s look like a low 3-handle here," he added. "Yields are not really going to tumble here unless the risk of a US recession climbs higher."

US 30-year bond yields rose to 3.075 percent, from 3.06 percent on Monday. Thirty-year yields climbed to as high as 3.08 percent, a four-week peak.

On the short end of the curve, US 2-year yields were modestly lower on the day at 2.53 percent, compared with Monday's 2.535 percent.

US yields across most maturities earlier rose, bolstered by strong corporate debt supply as well as increased risk appetite with gains in oil prices and Wall Street shares.

A solid slate of US corporate bond supply helped drive the sell-off in Treasuries, pushing yields higher

"The corporate calendar is picking up so there is some hedging going on," said Priya Misra, head of global rates strategy at TD Securities in New York.

Ahead of corporate supply, bond managers tend to hedge against large interest rate moves by selling US government debt.

Four deals are expected to price in the investment grade market on Tuesday, with Fox and Citibank two of the biggest names. Three deals were priced on Monday totaling $5 billion, bringing monthly issuance to $59.05 billion, according to IFR data.

Copyright Reuters, 2019
 

 

 

 

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