* U.S. core, year-on-year CPI shows weak inflation * Brexit uncertainty weighs on U.S. yields * U.S. 10-year note auction shows strong demand (Adds comments, Brexit vote, auction results; updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, March 12 (Reuters) - U.S. Treasury yields tumbled on Tuesday, pressured by weak inflation data for the world's largest economy, supporting expectations the Federal Reserve will hold interest rates steady this year, as well as worries about Britain's exit from the European Union. U.S. benchmark 10-year note yields slid to the lowest level in 10 weeks, while yields on 30-year bonds dropped to a three-week trough, also falling after a 10-year note auction showed strong demand. "There's probably some spillover from what's going on in Britain, specifically Brexit, because the headlines coming out of there have been profoundly discouraging," said Tom Simons, money market senior economist at Jefferies in New York. Any type of uncertainty or chaos arising from Brexit "would have an impact on global growth prospects," he said. Concerns about Britain's exit from the European Union boosted Treasury prices, which move inversely to yields, after the British Parliament rejected Prime Minister Theresa May's revised Brexit deal. In the United States, the Labor Department said its consumer price index rose 0.2 percent in February on higher costs of food, gasoline and rents. The index had been unchanged for the prior three months. Excluding the volatile food and energy components, the CPI edged up just 0.1 percent, the smallest increase since August 2018. In the 12 months through February, the CPI rose 1.5 percent, the smallest gain since September 2016. The data is yet another reason for the Fed to remain on hold, said Jon Hill, interest rates strategist at BMO Capital Markets in New York. The Fed raised rates four times in 2018. John Herrmann, rates strategist at MUFG Securities Americas, said his bank's models suggested the Fed will hold rates through the summer this year, followed by a shift to an easing monetary policy stance at the U.S. central bank's September policy meeting. In afternoon trading, U.S. 10-year note yields fell to 2.601 percent, down from 2.641 percent late on Monday. Earlier in the session yields hit a 10-week low. The Treasury's auction on Tuesday saw a solid takedown of the 10-year notes. The note was priced at 2.615 percent, lower than the 2.623 percent at the bid deadline. Bids totaled nearly $62.2 billion for a 2.59 cover, better than last month's 2.35, and higher than the 2.49 average. U.S. 30-year bond yields were down at 2.987 percent , from 3.032 percent on Monday, after earlier sliding to a three-week trough. On the short end of the curve, U.S. 2-year yields slipped to 2.450 percent, compared with Monday's 2.477 percent. March 12 Tuesday 3:20 PM New York / 1920 GMT Price Current Net Yield % Change (bps) Three-month bills 2.405 2.4535 -0.003 Six-month bills 2.46 2.5257 -0.004 Two-year note 100-24/256 2.4505 -0.026 Three-year note 99-232/256 2.4076 -0.036 Five-year note 99-218/256 2.4068 -0.033 Seven-year note 100-4/256 2.4975 -0.035 10-year note 100-52/256 2.6015 -0.039 30-year bond 100-52/256 2.9896 -0.042 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.50 -0.75 spread U.S. 3-year dollar swap 9.25 0.25 spread U.S. 5-year dollar swap 6.75 -0.50 spread U.S. 10-year dollar swap 1.25 -0.50 spread U.S. 30-year dollar swap -20.25 -0.50 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Leslie Adler)
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