* Positive U.S. economic data support Treasury yields
* Geopolitical tensions prevent sell-off
By Gertrude Chavez-Dreyfuss
NEW YORK, July 16 (Reuters) - U.S. benchmark Treasury yields edged higher for a third straight session on Wednesday, boosted by yet another piece of data suggesting the world’s largest economy is on solid footing.
U.S. 10-year yields hit the day’s highs following a report that showed U.S. producer prices rose more than expected in June with gains across most categories.
The Labor Department said on Wednesday its producer price index for final demand 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 0.2 percent.
“This morning when we came in, the market has been selling off a little bit and the PPI was sort of the nail in the coffin,” said David Keeble, global head of interest rates strategy at Credit Agricole in New York. “The moment the PPI came out, the drop extended the small one that we had already built.”
In mid-morning trading, the benchmark 10-year U.S. Treasury note was down 1/32 in price to yield 2.554 percent, slightly up from 2.554 percent late on Tuesday. The 30-year bond was also down 1/32 in price, to yield 3.368 percent.
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.
Still, there has been some support for Treasuries, given tensions in the Middle East and uncertainty surrounding Portugal’s largest listed bank, Banco Espirito Santo.
Israel on Wednesday urged the evacuation on Wednesday of several Gaza Strip areas where more than 100,000 people live, threatening ground operations after briefly holding fire under an Egyptian truce proposal that failed to stop Palestinian rocket salvoes. [ID;nL6N0PR0TR]
In Portugal, 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. (Reporting by Gertrude Chavez-Dreyfuss; Editing by James Dalgleish)