Ten-year Treasury yield edges up after hitting nearly three-year low

U.S. Treasury bond yields rose slightly Thursday morning after benchmark government debt rallied, driving yields to fresh 52-week lows earlier this week on the back of a series of interest rate reductions by international central banks.

Thursday’s yield climb comes as the People’s Bank of China set its daily reference rate for its onshore yuan currency at its weakest level since April 21, 2008, but the currency fixing at 7.0039 per dollar was set at a slightly higher level than had been expected, helping calm some worries that Beijing would use its currency to engage in a more aggressive trade clash with the U.S.

The yield on the benchmark 10-year Treasury note  tacked on 4.8 basis points to reach 1.723%, after it fell to its lowest since Oct. 3, 2016 in the prior session, according to Dow Jones Market Data.

The 2-year yield picked up 3.2 basis points to 1.602%, after the short-term debt hit its lowest since Oct. 23, 2017, while the 30-year Treasury bond yield  rose 4.2 basis points to 2.230%, following its lowest rate since July 29, 2016.

All three Treasurys notched fresh 52-week rate lows on Wednesday.

On Wednesday, yields followed equities higher in a volatile session that saw the Dow Jones Industrial Average erase a 589-point intraday stumble.

Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, said he’s expecting yields to rise after a series of sharp falls in sovereign debt markets.

“The bond market has run quite far over the last few weeks. We are waiting for pullbacks near 1.85% on 10year yields to get back involved on the long-side,” he wrote in a Thursday research note.

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Investors will be closely watching an auction of 30-year U.S. debt, which could help gauge appetite for Treasurys and influence overall government debt trading.

Yields rose off session lows after a $24 billion auction of 10-year notes on Wednesday was met with somewhat tepid demand.

In economic data, investors are awaiting a report on U.S. weekly jobless claims due at 8:30 a.m. Eastern Time, and a report on wholesale trade at 10 a.m.

Bonds yields have mostly mounted a steady decline reflecting increased appetite for sovereign debt amid growing concerns that the global economy is on the verge of a recession.

On Wednesday, policy makers in Thailand, India and New Zealand cut interest rates.

Hussein Sayed, chief market strategist at brokerage FXTM said, “policy makers seem to be getting prepared for a worsening global economic outlook,” he said the data, however, doesn’t necessarily support that view.

Indeed, the Bank of France’s July business survey indicated an acceleration in growth in the eurozone’s second-largest economy behind Germany.

Yields continue to be vulnerable to lower moves as the Federal Reserve is expected to cut rates further this year despite Federal Open Market Committee Chairman Jerome Powell on July 31 stating that a decision to reduce interest rates by a quarter of a percentage point wasn’t the start of a rate-cutting cycle.

Market bets on another quarter-of-a-percentage cut in rates at the end of the Fed’s next gathering on Sept. 18 are at 77%, with the chance of a 50-basis-point reduction at 24% based on federal-funds futures, .

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