TREASURIES-US yields mixed as Trump policy questions continue

By Gertrude Chavez-Dreyfuss

NEW YORK, Jan 24 (Reuters) - U.S. Treasury yields were mixed on Friday, with the long end of the curve modestly higher and with no real catalyst for market direction, as investors continued to await more definitive policies on tariffs from the new administration.

President Donald Trump, however, did soften his stance on China with respect to tariffs. In an interview with Fox News aired on Thursday evening, Trump said he would rather not have to use tariffs against China and that he thought he could reach a trade deal with the world's second-largest economy.

That was a massive step back from his campaign threat of imposing 60% duties on Chinese imports.

"The bond market has nothing to do and it's hanging out here," said Stan Shipley, managing director and fixed income strategist, at Evercore ISI in New York.

"We don't know anything much of Trump's policies. Statements on tariffs were mixed, in fact they were modestly positive. And on top of the we have the Federal Reserve meeting next week and a boatload of data," he added.

In mid-morning trading, the benchmark U.S. 10-year yield US10YT=RR was marginally higher at 4.646%. It was up 2.6 basis points (bps) so far this week.

The yield on the 30-year bond US30YT=RR edged up less than 1 bp at 4.877%, and was 2.4 bps higher this week.

On the short end of the curve, the two-year US2YT=RR Treasury yield, which is typically tied to monetary policy, was slightly lower at 4.281%.

The U.S. Treasury yield curve on Friday, meanwhile, steepened, with the gap between two-year and 10-year Treasury yields hitting 37.6 bps US2US10=TWEB, compared with 35.1 late Thursday.

The curve has steepened for a third straight day. The overall trend in an easing cycle remained tilted toward a steeper curve, with yields on longer-dated Treasuries higher than short-term maturities, which are under control being linked to interest rate policy.

Fed policymakers next week are expected to keep interest rates on hold, although but the bigger debate will be how the central bank confronts early moves by Trump that are likely to shape the economy this year, including demands that the Fed continue lowering borrowing costs.