* ECB upgrades growth forecast, cuts inflation outlook
* Ex-FBI chief Comey testifies, markets show little reaction
(Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, June 8 U.S. Treasury yields rose on
Thursday as investors looked past the testimony of former
Federal Bureau of Investigation chief James Comey, who made no
new revelation about the agency's Russian probe, to focus on the
Federal Reserve's widely expected interest rate hike next week.
Comey, fired by U.S. President Donald Trump on May 9,
testified before a Senate committee on Thursday that he was
disturbed by Trump's bid to get him to drop a probe into former
national security adviser Michael Flynn. Comey, however, would
not say whether he thought the president sought to obstruct
The Senate was investigating whether the Trump campaign team
conspired with Russia to influence the U.S. presidential
election last year.
"I think the market is taking less of an alarmist review of
this situation because there is no smoking gun here that there
has been any illegal activity by high-ranking officials, so it's
not particularly impactful for thinking about the impact for
Trump's economic agenda," said Tom Simons, money market
economist, at Jefferies in New York.
Tom di Galoma, managing director at Seaport Global Holdings
in New York, noted that the more important driver for the market
was next week's expected rate hike.
Rate futures have fully priced in a Fed tightening at the
June 14 policy meeting.
The European Central Bank's decision on Thursday not to cut
interest rates as the euro zone economy rebounded, as well as
remarks by its president, Mario Draghi, spurred a brief initial
drop in U.S. yields, in line with those of German bonds.
The ECB also said subdued inflation meant it would continue
to pump stimulus into the region's economy.
Draghi said in a news briefing that reducing asset purchases
in the region was not discussed at the meeting, and that the ECB
would be in the market for a long time.
The ECB estimated inflation of 1.5 percent in 2017 and 1.3
percent in 2018, compared with its forecasts of 1.7 percent and
1.6 percent respectively in March. That is well below its target
of just under 2 percent.
In late trading, U.S. 10-year notes were last
down 4/32 in price, with yields at 2.193 percent, compared with
2.180 percent late on Wednesday.
U.S. 30-year bonds fell 10/32 in price, yielding 2.852
percent, compared with Wednesday's 2.837 percent.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Dion Rabouin; Editing by Chris Reese and Richard Chang)