* Dovish Fed minutes underpin demand for U.S. bonds
* Benchmark yields on track to fall 5th straight session
* Two-year yield retreats further from 10-month high
* Yellen's testimony before Congress next week seen key
By Richard Leong
NEW YORK, July 11 U.S. Treasuries prices rose on
Friday, with benchmark yields hovering at their lowest in five
weeks, on safe-haven demand stemming from intensified fighting
in the Middle East and worries about problems at Portugal's
biggest listed bank.
Appetite for Treasuries has also been stoked by the minutes
of the U.S. Federal Reserve's June policy meeting released on
Wednesday, which hinted that the central bank is likely to cling
to its near zero interest rate policy until the second half of
Benchmark yields were on track to fall for a fifth straight
session, matching a streak last seen in March, as anxious
investors scrambled for low-risk bonds and unloaded equities,
knocking stock indexes from record highs.
"People don't want to be short bonds going into the weekend
with the situation in Portugal and the geopolitical concerns in
the Middle East," said Larry Milstein, head of government and
agency trading at R.W. Pressprich & Co in New York.
Worries that Banco Espirito Santo's problems may
kindle another banking crisis in Europe receded a tad after the
Portuguese bank released a statement that said it had adequate
capital to protect against any losses. The bank has been under
scrutiny due to its link to a web of companies in the Espirito
Santo business empire.
Meanwhile, Israeli air strikes continued for a fourth day on
the Gaza Strip, stoking worries about tension spreading to the
rest of the region.
These overseas developments have overshadowed upbeat news on
the U.S. economy, analysts and traders said.
Despite last week's strong June payrolls reading, the
10-year yield has declined nearly 13 basis points this week,
while two-yield has retreated from a 10-month high set on
While bidding on this week's $61 billion in fixed-rate
government debt was relatively weak, traders say appetite for
Treasuries should remain solid as they are yielding more than
their European and Japanese counterparts.
"There is demand for long-dated U.S. paper because there's
not so much high-quality supply out there," Milstein added.
Looking ahead, traders await more clues on when the U.S.
central bank will raise interest rates when Fed Chair Janet
Yellen is scheduled to testify on the economy before Congress
next Tuesday and Wednesday.
On the open market, benchmark 10-year Treasuries
were up 3/32 in price with a yield of 2.523 percent, down 1
basis point from late on Thursday.
The 30-year bond was 10/32 higher in price,
yielding 3.348 percent, down nearly 2 basis points from
Thursday, while the two-year note was yielding 0.448
percent, down 1 basis point on the day.
(Reporting by Richard Leong; Editing by Peter Galloway)