US bond yields rise, dollar down as turbulent week wraps up

NEW YORK (Reuters) -U.S. Treasury yields rose to a two-month high on Friday and 10-year yields were on track for their biggest weekly increase in decades, while the U.S. dollar fell, as a turbulent week drew to a close.

U.S. stock indexes rose more than 1%, with bank shares rising following mostly upbeat earnings. Also helping stocks were assurances from Boston Federal Reserve President Susan Collins that the Fed is prepared to keep financial markets functioning should the need arise.

Gold prices hit another record high after Beijing increased its tariffs on U.S. imports to 125%, hitting back against U.S. President Donald Trump’s decision to hike duties on Chinese goods.

Markets have been rocked by the global trade war and worries about recession since Trump announced sweeping tariffs on April 2.

“Trump continues to dominate the headlines and the financial markets, especially as we get into this period of negotiating tariffs,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“There will be lots of rumors and posturing,” he said.

Investors also digested a report showing U.S. consumer sentiment deteriorated sharply in April and another showing U.S. monthly producer prices unexpectedly fell in March.

They also looked at results from some big Wall Street banks, which kicked off the quarterly U.S. reporting period. JPMorgan Chase, Morgan Stanley and Wells Fargo were among the reports, which mostly showed major U.S. banks beat forecasts for the first quarter. JPMorgan shares rose 4.6%.

Ten-year Treasury yields were on track for their biggest weekly increase in more than two decades as investors remained nervous about further bond market liquidation amid Trump’s unpredictable approach to tariffs.

The 10-year note yield was last up 10.3 basis points at 4.495% and reached 4.592%, the highest since February 13. It is on track for the largest weekly increase since 2001.

Analysts said hedge funds and other asset managers offloaded bonds this week after getting margin calls and posting sharp losses from market volatility.

Strong auctions of 10-year and 30-year debt on Wednesday and Thursday helped stabilize the market somewhat, but many investors remain wary of buying bonds until there is further improvement in liquidity.

Earlier, euro zone bond yields eased, and the premium that holders of Treasuries demand to hold U.S. debt rather than German Bunds rose by the most in a week since the 1990s.

With the trade war hanging over the outlook, investors will be watching to see whether U.S. companies continue to offer guidance during the earnings period.

The Dow Jones Industrial Average rose 648.65 points, or 1.64%, to 40,242.31, the S&P 500 rose 93.70 points, or 1.78%, to 5,361.75 and the Nasdaq Composite rose 312.92 points, or 1.91%, to 16,700.23.

MSCI’s gauge of stocks across the globe rose 11.55 points, or 1.48%, to 790.82. The pan-European STOXX 600 index ended down 0.1%.

The dollar extended losses against the Swiss franc from the previous session, plunging to its lowest since January 2015. Against the Swiss franc, the dollar weakened 0.72% to 0.817. The dollar also hit a three-year low versus the euro.

Spot gold was up 2% at $3,236.67 an ounce, after hitting a record high of $3,243.82 earlier in the session. Bullion is up over 6% this week.

Oil prices climbed. Brent crude futures settled at $64.76 a barrel, up $1.43, or 2.26%. U.S. West Texas Intermediate crude finished at $61.50 a barrel, up $1.43 or 2.38%.

(Reporting by Caroline Valetkevitch in New York and Amanda Cooper in London; Editing by Nia Williams and Rod Nickel)