(Updates prices, adds comment, changes byline)
* Treasury prices rebound, yields dip
* Yellen defends Fed policy before House, sticks to
* Geopolitical tensions prevent sell-off
By Daniel Bases
NEW YORK, July 16 U.S. benchmark Treasury yields
edged lower on Wednesday, slipping back from an early boost
delivered after data suggesting the world's largest economy is
on solid footing.
Higher-than-expected June producer price index data was
balanced against data showing a lower-than-expected increase in
June industrial production.
"As depressing as it is, we're not responding one way or the
other to data. Prices are high and you have the Fed nicely
priced in," said David Ader, head of government bond strategy at
CRT Capital Group in Stamford, Connecticut.
"The Fed has been dovish and Yellen has given us a bit of an
outline. We're priced 18 months from now to the information we
have vis-a-vis the Fed today," Ader said.
Earlier, Federal Reserve Chair Janet Yellen spoke before the
House of Representatives Financial Services Committee, repeating
largely what she told the Senate Banking Committee on Tuesday.
Yellen stood by her view that accommodative U.S. monetary
policy is still needed even though the economy is recovering.
Benchmark 10-year U.S. Treasuries were up 4/32 of a point in
price, pushing the yield down to 2.53 percent in afternoon New
York trade. The 30-year U.S. Treasury bond was up
13/32, bringing the yield down to 3.34 percent.
The Labor Department said on Wednesday its producer price
index increased 0.4 percent, reversing May's 0.2 percent
decline. Economists polled by Reuters had forecast prices
received by the nation's farms, factories and refineries rising
U.S. industrial output also increased 0.2 percent in June,
while U.S. homebuilder sentiment rose in July to a six-month
high, further evidence the economy was improving steadily.
There was some support for Treasuries coming from investor
concerns over tensions in the Middle East and uncertainty
surrounding Portugal's largest listed bank, Banco Espirito Santo
Israel on Wednesday urged the evacuation of several Gaza
Strip areas which are home to more than 100,000 people,
threatening ground operations after briefly holding fire under
an Egyptian truce proposal that failed to stop Palestinian
rocket salvoes. [ID;nL6N0PR0TR]
Portuguese bond yields fell on Wednesday, with investors
more optimistic that BES can deal with the financial troubles
faced by its founding family, but uncertainty remained high with
respect to the Portuguese bank.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by