February 13, 2019 / 7:42 PM / in 5 months

TREASURIES-Yields rise, curve flattens as U.S. core consumer prices gain

 (Updates prices)
    * Core consumer prices rose in January
    * Trump keeping options open on government funding deal

    By Karen Brettell
    NEW YORK, Feb 13 (Reuters) - U.S. benchmark Treasury debt
yields rose to one-week highs on Wednesday and the yield curve
flattened after data showed that core consumer prices rose in
January, easing concerns about a drop in inflation.
    The core Consumer Price Index, which excludes volatile food
and energy components, rose 0.2 percent for a fifth straight
month.             
    “The core CPI print was quite solid,” said Gennadiy
Goldberg, an interest rate strategist at TD Securities in New
York. “I think there is a little bit of a breath of relief here
that underlying inflation is still relatively solid and the Fed
can continue to hike.”
    Benchmark 10-year notes             fell 7/32 in price to
yield 2.708 percent. 
    The yields have dropped from 2.799 percent on Jan. 18 and
are down from a seven-year high of 3.261 percent in October as
investors adopt a more pessimistic view of the global economy
and price in a far more dovish Federal Reserve.
    The yield curve between two-year and 10-year notes
               flattened to 17 basis points, from 18 basis
points before the inflation data.
    Two-year notes are the most sensitive to interest rate
policy.
    Retail sales data for December on Thursday and consumer
sentiment data on Friday will be the next economic focus for
further signals about the U.S. economy's strength.
    Yields also rose as optimism that the U.S. government would
avert another shutdown and that the U.S. would forge a trade
deal with China reduced safe haven demand for the bonds.
    U.S. President Donald Trump left his options open on
Wednesday over whether to sign a funding deal that would avert
another partial government shutdown but leave him short of the
money he wants to build a wall on the border with
Mexico.            
    U.S. Treasury Secretary Steven Mnuchin said talks with China
went well on Wednesday, as the world's two largest economies try
to iron out an agreement to resolve their trade dispute.
            

 (Editing by Bernadette Baum and Steve Orlofsky)
  
 
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