(Recasts, adds comment, details updates prices)
* U.S. CPI rises 0.3 percent, Treasuries gain
* Geopolitics still a big factor
By Gertrude Chavez-Dreyfuss
NEW YORK, July 22 U.S. Treasury debt yields fell
on Tuesday as benign U.S. inflation data suggested less pressure
for the Federal Reserve to raise interest rates sooner than
There was also some safe-haven buying in the afternoon,
boosting bond prices, in connection with tensions in the Middle
East after the Federal Aviation Administration advised U.S.
airlines not to fly to Tel Aviv in Israel. The country is in the
midst of an offensive in the Gaza Strip where more than 600
people have been killed.
But it was the U.S. consumer price index data that caught
investors' attention in a market that has been riveted by
fighting in the Middle East and Ukraine.
U.S. core CPI, a closely-watched inflation gauge, was below
the Fed's 2-percent target, preventing yields, which move
inversely with bond prices, from ratcheting higher.
"Core inflation numbers were below consensus and that has
removed fears that the Fed will hike in a hurry," said Aaron
Kohli, interest rate strategist at BNP Paribas in New York.
In late trading, benchmark 10-year U.S. Treasuries
were up 1/32 in price to yield 2.469 percent, while
the 30-year Treasury bond was up 6/32 in price, pushing the
yield down to 3.254 percent. On Monday U.S. 30-year
Treasury bond yields fell to their lowest since June 2013.
In the meantime, geopolitical concerns are still very much a
factor in the U.S. Treasuries market.
Israel pounded targets across the Gaza Strip on Tuesday,
saying no ceasefire was near, while European Union foreign
ministers threatened Russia with harsher sanctions over Ukraine.
But the tougher talk may not be matched by much action after
France's president signaled the disputed delivery of a warship
to Moscow would go ahead.
"Geopolitical concerns are one of the reasons investors are
afraid of shorting Treasuries. They are certainly an aggravating
factor," said BNP's Kohli.
Volume in the U.S. Treasury market was heavy in the morning
with cash trading peaking at 149 percent of the 10-day
moving-average, according to CRT Capital, before trending back
down to just 108 percent.
U.S. five-year notes were the most active benchmark, taking
a 32-percent market share, while 10s were a distant second at 26
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler
and Meredith Mazzilli)