October 12, 2017 / 6:55 PM / in 9 days

TREASURIES-Prices gain after strong auction, before CPI data

 (Adds auction results, quotes, North Korean fears, updates
prices)
    * Solid demand for $12 bln sale of 30-year bonds
    * Consumer price data on Friday in focus
    * North Korea fears adds some safety buying

    By Karen Brettell
    NEW YORK, Oct 12 (Reuters) - U.S. Treasury prices gained on
Thursday after the Treasury Department's $12 billion bond sale
drew strong demand, and as investors repositioned ahead of
inflation data due on Friday.
    The 30-year bonds sold at yields just below pre-auction
levels, and the bid-to-cover ratio was 2.53, the highest since
September 2015.             
    "It went well," said Justin Lederer, an interest rate
strategist at Cantor Fitzgerald in New York. "There was demand
out the curve, after the recent selloff rates have stabilized."
    Demand was also solid for Treasury's $24 billion in
three-year notes and $20 billion in 10-year notes on Wednesday.
                         
    Bids were supported by news from the United States
Geological Survey (USGS) on Thursday about an event with
"earthquake like characteristics" in an area in North Korea
where there had previously been nuclear tests, but that the USGS
could not determine if it was natural or man-made.
    Benchmark 10-year notes             gained 5/32 in price to
yield 2.327 percent, down from 2.345 percent on Wednesday.
    Traders shifted focus to consumer price data due on Friday
for further indications of whether inflation is picking up.
    The Labor Department said on Thursday its producer price
index for final demand increased 0.4 percent in September. In
the 12 months through September, the PPI jumped 2.6 percent, the
biggest gain since February 2012.             
    "PPI was a little bit better, but that doesn't really
translate well to CPI," said Gennadiy Goldberg, an interest rate
strategist at TD Securities in New York. "I think for the most
part markets are still waiting for the CPI report tomorrow."
    Ten-year yields jumped to 2.402 percent on Friday, the
highest level since May 11, after the government's employment
report for September showed a rise in wages that boosted
expectations for rising inflation.
    Analysts, however, have said that data was muddied by recent
hurricanes. Adverse weather is seen as having impeded
lower-income workers from getting to work more than it did
higher-income workers.
    Minutes from the Federal Reserve's September meeting
released on Wednesday showed that Fed policymakers had a
prolonged debate about the prospects of a pickup in inflation
and the path of future interest rate rises if it did not.
            

 (Editing by Susan Thomas and Richard Chang)
  
 
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