Bonds News

TREASURIES-U.S. yields slide from highs, mixed overall, after inflation data

 (Recasts, adds new comment, U.S. inflation data, table, updates
    * U.S. inflation rise slows in July
    * U.S. 10-year inflation breakeven rate slips
    * U.S. yield curve flattens after steepening for 4 straight

    By Gertrude Chavez-Dreyfuss and Yoruk Bahceli
    NEW YORK/LONDON, Aug 11 (Reuters) - U.S. Treasury yields
slipped from their highs on Wednesday in choppy trading, with
those on the 10-year falling from four-week peaks, after data
showed a slight moderation in consumer prices for the month of
July in the world's largest economy.
    Yields overall were mixed, with those on the long end,
slightly higher on the day, and the shorter-dated ones lower.
    The yield curve, a gauge of economic sentiment and rate move
expectations, flattened to 110.80 basis points, as measured by
the spread between two-year and 10-year yields.
That curve had steepened in the four previous sessions.
    U.S. yields were a lot higher before the inflation data,
bolstered by comments from two Federal Reserve officials on
Tuesday, suggesting that the central bank could soon reduce or
taper its asset purchases. Tapering tends to push
Treasury debt prices lower and yields higher because it means
the Fed is buying less of those bonds.
    U.S. consumer price increases slowed in July but inflation
overall remained historically high. The consumer price index
increased 0.5% last month after climbing 0.9% in June. Excluding
the volatile food and energy components, the CPI rose 0.3% after
increasing 0.9% in June.
    "At the end of the day this is a more moderate reading than
expected, especially on the core, and that was driven by rents
and rents were the big worry ... if rents began to accelerate
then you'd certainly see some concern," said Gennadiy Goldberg,
senior rates strategist, at TD Securities in New York.
    "But it doesn't seem that that's coming at the moment and I
think that's going to make the Fed a little bit more confident
that they can let inflation run a little bit hotter in the near
term without having to worry about overshooting and having to
tighten rather quickly to cut off inflation," he added.
     Additional spending mooted by President Joe Biden's
infrastructure plans could further complicate the inflation
outlook, however, said Jens Peter Sorensen, chief analyst at
Danske Bank.
    The U.S. Senate on Tuesday passed a massive infrastructure
bill and kicked off debate on a further $3.5 trillion spending
blueprint for climate change, universal preschool and affordable
    The yield on 10-year Treasury notes was
unchanged to 1.342%. Earlier in the session, the 10-year yield
hit a four-week high of 1.378%
    The yield on the 30-year Treasury bond was up
1.6 basis points to 2.000%. 
    The two-year U.S. Treasury yield, was down 1
basis points at 0.229%. 
    The 10-year TIPS breakeven rate, the inflation
average expected per year for the next decade, was last at
2.385%, slightly down from 2.391% on Tuesday.
    Later on Wednesday, the U.S. Treasury will auction $41
billion in U.S. 10-year notes. That will follow a strong U.S.
3-year note sale that was boosted by the decline in bond prices
and persistent safe-haven demand over the surge in global virus
      August 11 Wednesday 9:29 AM New York / 1329 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.055        0.0558    0.000
 Six-month bills               0.055        0.0558    0.000
 Two-year note                 99-204/256   0.2285    -0.010
 Three-year note               99-194/256   0.4565    -0.019
 Five-year note                99-24/256    0.8115    -0.012
 Seven-year note               99-56/256    1.1168    -0.006
 10-year note                  102-152/256  1.3405    -0.002
 20-year bond                  105-180/256  1.9023    0.009
 30-year bond                  108-100/256  1.9995    0.016
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         8.00        -0.50    
 U.S. 3-year dollar swap         8.75        -2.50    
 U.S. 5-year dollar swap         8.25        -0.25    
 U.S. 10-year dollar swap        0.50        -0.50    
 U.S. 30-year dollar swap      -29.50        -0.25    
 spread (Reporting by Gertrude Chavez-Dreyfuss in New York and Yoruk
Bahceli in London; Additional reporting by Karen Brettell in New
York; Editing by Sujata Rao and David Evans)