TREASURIES-US yields advance for 2nd day as policy uncertainty persists

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Trump says he will demand interest rates go down

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US jobless claims rise in latest week

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US rate futures price in 39 bps of easing in 2025

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US 2/10 yield curve steepens

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US 10-year TIPS auction shows mixed results

(Adds new comment, graphic, 10-year TIPS auction, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, Jan 23 (Reuters) - U.S. Treasury yields gained on Thursday, rising for a second straight session as investors continued to sell government debt amid continued policy uncertainty from the new administration, especially on tariffs.

Tariffs are a crucial issue for the bond market because of their inflationary implications.

The bond market showed little reaction, however, to comments from U.S. President Donald Trump, who said on Thursday he will push for interest rates to drop and for lower oil prices. Trump spoke via video to the World Economic Forum in Davos, Switzerland, in his first major speech to global business and political leaders.

Trump repeatedly advocated for low interest rates during his first term as president.

"The bond market assumes, and rightly so, that (Jerome) Powell will be Federal Reserve Chair through the middle of 2026 and therefore the assumption is that the Fed remains independent and will do what is appropriate given the economic conditions," said Guneet Dhingra, head of U.S. rates strategy, at BNP Paribas in New York.

"What President Trump thinks about interest rates may have a bearing when he chooses to nominate somebody for the Fed at some point in the next 18 months."

Trading was subdued overall as investors awaited more policy pronouncements from the Trump administration.

In afternoon trading, the benchmark 10-year yield, which moves inversely to prices, rose 4.8 basis points (bps) to 4.644% .

U.S. 30-year yields slid 5.5 bps to 4.870%.

On the front end of the curve, the two-year yield, which is tied to Federal Reserve policy, slipped 1 bp to 4.289% .

"For the next couple of months, we're going to face some policy uncertainty. We don't know what the focus is going to be," said Brian Ellis, portfolio manager on the Broad Markets Fixed Income team at Morgan Stanley Investment Management in Boston.

"Will it be on growth, or deregulation, or tax cut extension, or would it be more on the tariff side? The 10-year is where you'll see all that volatility," he added.

Also on Thursday, the Treasury sold $20 billion in 10-year Treasury Inflation-Protected Securities (TIPS) and the outcome was mixed overall. It priced at 2.243%, slightly higher than the indicated yield at the 1 pm deadline, meaning investors demanded a higher yield to buy the note.

The auction's yield of 2.243% was the highest since January 2009.

The bid-to-cover ratio, another measure of demand, was 2.48, the highest since January 2024, and stronger than the 2.35 in the previous auction and the 2.42 average.

Post-auction, the U.S. 10-year TIPS yield was flat at 2.19% . It rose right after the auction.

Treasury yields extended their gains after data showed the number of Americans filing new applications for unemployment benefits rose slightly last week.

Initial claims for state unemployment benefits increased by 6,000 to a seasonally adjusted 223,000 for the week ended Jan. 18. Claims were likely lifted by the wildfire in Los Angeles, with unadjusted applications increasing in California, but falling in the majority of states.

Overall, the claims numbers suggested no deterioration in labor market conditions, backing expectations the Fed would not cut interest rates next week.

U.S. rate futures priced in nearly 40 bps of easing in 2025, or roughly just one reduction, little changed from late Wednesday, according to LSEG data. The market also factored in a 66% chance that the next rate reduction would likely take place at the Fed's June meeting.

The U.S. Treasury yield curve on Thursday, meanwhile, steepened, with the gap between two-year and 10-year Treasury yields hitting 36.1 bps, compared with 30.9 late Wednesday.

The curve has steepened in two of the last six sessions. The trend remained biased toward a steeper curve in an easing cycle, analysts said, with the front end under control being linked to interest rate policy.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Nick Zieminski and Nia Williams)