US bond yields hit 3-week highs as Wall Street rallies

NEW YORK: US Treasury yields rose to three-week highs on Friday as investors piled back into Wall Street on hopes Washington and Beijing are moving to end their trade dispute and stronger-than-expected data on manufacturing output.

Bond yields were on track for a second week of increases as 10-year yields climbed further from the near one-year low set two weeks ago.

"The risk-on mood has caused yields to move higher," said John Canavan, market strategist at Stone & McCarthy Research Associates in New York.

The S&P 500 index was up 1.21 percent, while the Dow was 1.16 percent higher and the Nasdaq was up 1.17 percent.

The improved outlook on trade came in the aftermath of a Wall Street Journal report that US Treasury Secretary Steven Mnuchin was considering lifting some or all tariffs imposed on Chinese imports. The Treasury denied Mnuchin floated such a recommendation.

The yield on benchmark 10-year Treasury notes hit a three-week peak, last trading at 2.791 percent, 4.4 basis points above Thursday's close.

The 10-year yield was poised to increase almost 9 basis points this week, which would be the biggest weekly rise since the week of Nov. 2, according to Refinitiv data.

Treasury yields have risen partly on competition from higher-yielding corporate bonds. Companies have raised $25.7 billion through investment-grade debt sales this week, according to IFR.

Worries about a slowing US economy eased following a Federal Reserve report that showed industrial output grew 0.3 percent in December, more than what analysts had forecast.

But consumer sentiment deteriorated in early January to its weakest since October 2016, before Donald Trump's presidential victory, according to the University of Michigan.

The federal government shutdown, which is in its 28th day, remains a concern for investors as well as consumers.

Given the recent batch of mixed data and volatility in the stock market, Fed officials have signaled they are in no hurry to raise interest rates again after a rate hike last month.

Earlier Friday, New York Fed President John Williams said the US central bank must be patient and guided by data when deciding whether to raise interest rates.

US financial markets will be closed on Monday for the Martin Luther King Jr. holiday.