(Updates with market activity, 30-year auction results) By Ross Kerber BOSTON, Feb 13 (Reuters) - U.S. Treasury yields were slightly lower on Thursday as traders balanced worsening news about the coronavirus epidemic in China with positive U.S. economic reports. The benchmark 10-year yield was down 1.8 basis points in afternoon trading at 1.6087%. A strong auction of 30-year bonds at 1 p.m. (1800 GMT) also showed continued demand. The trading was part of a broader reaction to a sharp rise in the number of coronavirus deaths and infections reported in China, which unnerved world markets on Thursday and interrupted the rally in stocks while boosting the prices of U.S. government bonds and gold, which are considered safe havens. But positive economic data, such as consumer prices, prevented yields from falling further, said Andrew Richman, director of fixed income strategies at SunTrust Advisory Services, as investors bet against an extreme economic impact from the epidemic. "The U.S. is certainly not in a recession, Europe isn't getting any worse, and that's balancing out this terrible news from China," Richman said. In the 1 p.m. action, the U.S. Treasury sold $19 billion worth of 30-year bonds at a high yield of 2.061%, a record low for such auctions. BMO Capital Markets analyst Ben Jeffery said the result showed how traders did not hesitate to buy up the bonds, in line with equally strong demand for shorter-dated auctions earlier this week. "The record low is really a testament to how monetary policy and growth expectations have shifted," he said. "The fact that interest rates are so low, and that there's still record demand, supports the argument there is going to continue to be a structural demand for Treasuries," he said. The eventual impact of the coronavirus remains to be seen. Experts, including several affiliated with the National Association for Business Economics, have emphasized the many unknowns that remain, such as the disease's incubation period and fatality rates. In Hubei province in central China, officials said 242 people died on Wednesday, the biggest daily rise since the flu-like virus emerged in the provincial capital Wuhan in December. Total deaths in China were reported at 1,367. The province recorded thousands more infections, but that appeared to be largely due to a new counting method. Separately, U.S. underlying consumer prices picked up in January as households paid more for rents and clothing, supporting the Federal Reserve's contention that inflation would gradually rise toward its 2% target. The Labor Department said on Thursday its consumer price index, excluding the volatile food and energy components, rose 0.2% last month after edging up 0.1% in December. The so-called core CPI was up by an unrounded 0.2423% last month. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down less than a basis point at 1.4377% in afternoon trading. February 13 Thursday 2:21PM New York / 1921 GMT Price Current Net Yield % Change (bps) Three-month bills 1.5525 1.5845 0.007 Six-month bills 1.5225 1.5598 0.003 Two-year note 99-225/256 1.4377 -0.004 Three-year note 99-230/256 1.4098 -0.008 Five-year note 99-184/256 1.4339 -0.011 Seven-year note 99-204/256 1.5308 -0.014 10-year note 99 1.6087 -0.018 30-year bond 106-224/256 2.0645 -0.027 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 3.00 -1.00 spread U.S. 3-year dollar swap 1.75 -0.75 spread U.S. 5-year dollar swap -0.25 -0.75 spread U.S. 10-year dollar swap -5.25 -0.25 spread U.S. 30-year dollar swap -32.50 -0.25 spread (Reporting by Ross Kerber in Boston; editing by Jonathan Oatis)
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