September 28, 2016 / 7:15 PM / 4 years ago

TREASURIES-U.S. yields inch higher on OPEC news, but downtrend intact

* Global bank risks still positive factor for Treasuries
    * Fed's Yellen sees no meaningful rise in inflation

 (Adds comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Sept 28 (Reuters) - U.S. long-dated Treasury debt
yields edged higher on Wednesday, boosted by a Reuters report
that OPEC has reached a deal to limit oil production, with the
agreement to be implemented in November. 
    U.S. crude futures and Wall Street shares rose on the news,
boosting risk sentiment. 
    According to sources, OPEC agreed to limit oil output to
32.5 million barrels per day. 
    But despite the recovery, U.S. yields, which move inversely
to prices, are still in the midst of a downturn, analysts said,
after the Federal Reserve left interest rates unchanged last
week and took a cautious stance on the U.S. economy.
    Aside from the Fed outlook, problems at major banks and
economic data showing slow U.S. growth have bolstered
Treasuries' safe-haven appeal. 
    "You're not going to add risk in this kind of environment,"
said Jim Vogel, interest rate strategist at FTN Financial in
Memphis.
    "It may be risk-off or risk-on but you're not going to
change your overall risk appetite as long as we have low growth
combined with events that tend toward a negative surprise."
    Deutsche Bank has been a focus this week as it faces a $14
billion legal battle with the U.S. government in connection with
the bank's issuance and underwriting of mortgage-backed
securities. 
    Wells Fargo was also in the spotlight with its sales debacle
involving the creation of as many as 2 million accounts without
customers' permission. 
    Recent U.S. economic data have been far from stellar. On
Wednesday data showed that while U.S. durable goods orders beat
expectations, growth was flat for August. The government also
downwardly revised its July estimate to a 0.8 percent gain.
 
    Fed Chair Janet Yellen testified before the House Financial
Services Committee and discussed the health of U.S. banks. But
in the question-and-answer session, Yellen commented on the U.S.
economy, noting that she is not seeing any meaningful upward
pressure on inflation, but expects the jobless rate to fall
further. 
    In afternoon trading, U.S. benchmark 10-year Treasury notes
 were down 1/32 in price for a yield of 1.561,
compared with 1.556 percent late on Tuesday. 
    U.S. 30-year bonds slipped 3/32 in price, yielding 2.282
percent, up from Monday's 2.278 percent. 
    On the front end of the curve, U.S. two-year notes were flat
in price for a yield of 0.750 percent.
     The U.S. Treasury's $28 billion seven-year note auction on
Wednesday was uninspiring, said some analysts. The yield was at
1.389 percent versus 1.390 percent just before the bid deadline.
     Bids totaled $69.3 billion for a 2.47 bid-to-ratio cover,
better than 2.38 last month, but below the 2.50 average. 

 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith
Mazzilli)
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