US yields higher as equities rise, trade fears ebb

NEW YORK: US Treasury yields edged higher on Thursday as investors turned from trade fears to stock market optimism and data showed US inflation buildup remained modest.

The consumer price index (CPI) rose 0.1 percent in June, slightly less than analysts had expected. The CPI core rate, which better reflects the underlying inflation trend, came in at 0.2 percent month-over-month and 2.3 percent year-over-year, in line with expectations of economists polled by Reuters.

The CPI readings supported the view that inflation is near the Federal Reserve's 2 percent goal.

"It all fits within the within the context of firming inflationary trends with an extended economic expansion. And it's really fitting within that thesis of why the Fed has continued to raise short-term rates and is likely to continue to do so throughout this year," said Bill Northey, senior vice president at US Bank Wealth Management in Helena, Montana.

Domestic weekly jobless claims also fell to a two-month low as the labor market tightened further.

Bond yields also rose as demand for equities rebounded from the previous day's drop, with investors hoping for strong US corporate earnings and as major deals offset China-US trade war worries.

On the supply front, analysts expected strong demand for the auction for $14 billion in 30-year bonds at 1 p.m. (1700 GMT) on Thursday, after a successful auction for 10-year notes on Wednesday.

The Treasury is set to sell $69 billion coupon-bearing debt this week.

Benchmark 10-year Treasuries yielded 2.849 percent at 10:46 a.m. (1446 GMT).

US 2-year notes reached 2.602 percent, matching a level seen a month ago that was the highest since August 2008.

The yield curve was little moved from late Wednesday, with the spread between 2-year and 10-year Treasuries at 26.10 basis points.