October 14, 2016 / 3:49 PM / 9 months ago

TREASURIES-Yields rise after strong China data, solid U.S. retail sales

3 Min Read

* Chinese inflation data pushes yields higher

* 30-year yields hit 4-month high after U.S. retail sales, inflation data

* Selloff slowed by weak consumer sentiment data

By Dion Rabouin

NEW YORK, Oct 14 (Reuters) - U.S. Treasury yields rose across the board on Friday with 30-year bond yields hitting a four-month high as a rebound in Chinese inflation data eased concerns about sluggish growth from the world's second largest economy amid solid U.S. retail sales and inflation data.

China's inflation rose more than expected in September for both consumers and producers, with producer prices gaining for the first time since January 2012.

The strong selling in Treasuries that followed was an "overreaction" in anticipation of the retail sales data and an upcoming speech from Federal Reserve Chair Janet Yellen, said Lou Brien, market strategist at DRW Trading in Chicago.

"China giveth and China taketh away," Brien said. "This being the Halloween season, the markets are almost looking for something to spook them and the last couple of days it's been China that first spooked them higher and then spooked them lower."

Weak Chinese export data was seen as the catalyst on Thursday that sparked buying in Treasuries after two straight days of selling.

Friday's selloff initially paused after the release of the retail sales and producer price data, which largely matched the expectations of economists, but renewed the push lower as investors unpacked the retail sales numbers that showed strength in autos, gasoline, furniture and restaurants.

A reading on U.S. consumer sentiment that was the lowest since September 2015 pulled the market back from the day's price lows.

The drop in consumer sentiment was disappointing and "suggested the toxicity of the presidential election is probably weighing on consumer attitudes," said Tom Simons, money market economist at Jefferies & Co. in New York.

The University of Michigan, which sponsors the consumer sentiment survey, blamed the drop in September's reading from a strong number in August on "uncertainty" surrounding the Nov. 8 U.S. election.

Benchmark 10-year Treasury notes were last down 8/32 in price to yield 1.766 percent.

The 30-year bond was the main target of investor selling on Friday, with prices falling by more than 1 point in early trading and yields hitting their highest since June 23.

The long bond was last down 28/32 in price to yield 2.519 percent.

That steepened the yield curve, and the yield spread between 5- and 30-year Treasuries rose to more than 125 basis points, its highest since Sept. 21.

Reporting by Dion Rabouin; Editing by Chris Reese

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