(updates with market activity, auction result, analyst comment, bylines) By Karen Pierog and Ross Kerber Sept 28 (Reuters) - U.S. Treasuries extended their sell-off into a fourth day on Tuesday with the 10-year yield reaching a level last seen in mid-June, while inflation expectations rose. The benchmark 10-year yield climbed as high as 1.567% and was last up 4.3 basis points at 1.527%. Yields on two- and five-year notes reached their highest levels since the first quarter of 2020. Prices, which move inversely to yields, continued to be pulled down after the U.S. Federal Reserve last week revealed its latest clues on tapering its asset purchases and hiking interest rates, according to Kim Rupert, managing director of global fixed income analysis at Action Economics. She added that uncertainty in Washington over this week's government funding deadline, the debt ceiling limit and the potential for more massive federal spending also weighed on the market. "It's just so uncertain that it's leaving bulls kind of sidelined so no one wants to get in the mix with all of that going on," Rupert said. However the low prices eventually brought in traders and yields gave back some of their increases in afternoon trading. The U.S. sold $62 billion of 7-year notes at a high yield of 1.332%, a result that ISI Evercore macro research analyst Stan Shipley called "better than expected" given the uncertainty created by the standoff over budget talks in Washington. Growing inflationary pressures are starting to make investors nervous, with oil at three-year highs and Fed Chair Jerome Powell flagging that price pressures as a result of reopening bottlenecks might be more enduring than first thought. The yield on 10-year U.S. Treasury Inflation-Protected Securities rose to its highest since late June and was last at -0.861%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was last a basis point steeper at 122 basis points. September 28 Tuesday 2:11PM New York / 1811 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0375 0.038 0.000 Six-month bills 0.055 0.0558 0.005 Two-year note 99-228/256 0.3049 -0.004 Three-year note 99-122/256 0.5534 0.000 Five-year note 99-78/256 1.018 0.020 Seven-year note 98-176/256 1.3241 0.031 10-year note 97-120/256 1.527 0.043 20-year bond 95-184/256 2.0123 0.067 30-year bond 98-164/256 2.0611 0.066 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.50 -2.75 spread U.S. 3-year dollar swap 12.50 0.00 spread U.S. 5-year dollar swap 8.00 -1.50 spread U.S. 10-year dollar swap 2.75 0.25 spread U.S. 30-year dollar swap -24.50 -0.25 spread (Reporting by Karen Pierog in Chicago, Ross Kerber in Boston, and Tom Westbrook in Singapore, additional reporting by Sujata Rao and Dhara Ranasinghe in London Editing by Sherry Jacob-Phillips, Susan Fenton, Dan Grebler and Cynthia Osterman)
Our Standards: The Thomson Reuters Trust Principles.