July 12, 2018 / 8:09 PM / 9 months ago

TREASURIES-U.S. yields hold onto gains as inflation firms

    * June core CPI increases within expectations
    * Treasury sells $14 bln 30-year bonds in third day of
    * Fed's Powell not ready to declare victory on inflation

 (Updates market action, adds quote)
    By James Thorne
    NEW YORK, July 12 (Reuters) - U.S. Treasury yields edged
higher on Thursday as economic data showed U.S. inflation
buildup remained modest and labor markets were strong,
reinforcing expectations the Federal Reserve will maintain its
rate increase schedule.
    The consumer price index (CPI) rose 0.1 percent in June,
slightly less than analysts had forecast. The CPI core rate,
which better reflects the underlying inflation trend, came in at
0.2 percent month-over-month and 2.3 percent year-over-year, in
line with expectations of economists polled by Reuters.

    The CPI readings supported the view that inflation is near
the Federal Reserve's 2-percent goal.
    Federal Reserve Chairman Jerome Powell said in an interview
on National Public Radio's Marketplace program that he was "not
declaring victory" over inflation after meeting the Fed's 2
percent target.
    "(The economic data) all fits within the within the context
of firming inflationary trends with an extended economic
expansion. And it's really fitting within that thesis of why the
Fed has continued to raise short-term rates and is likely to
continue to do so throughout this year," said Bill Northey,
senior vice president at U.S. Bank Wealth Management in Helena,
    The Treasury sold $14 billion worth of 30-year bonds
, wrapping up three days of auctions that
increased coupon-bearing government debt by $69 billion.
    Benchmark 10-year Treasuries yielded 2.853
percent, pulling the price down 2/32 of a point by 3:52 p.m.
(1952 GMT).
    U.S. 2-year note yields earlier reached 2.602
percent, matching a level seen a month ago that was the highest
since August 2008. They have since dipped back to 2.594 percent.
    The spread between 2-year and 10-year Treasuries fell to
25.50 basis points, its lowest level since mid-2007.
    "The yield curve has been flattening almost on a daily
basis, and that's usually an indication that people need
duration," said Tom di Galoma, managing director at Seaport
Global Securities LLC in New York, noting the persistent bid for
longer-dated Treasuries. 
    July 12 Thursday 3:52PM New York / 1952 GMT
 US T BONDS SEP8               145-11/32    -4/32     
 10YR TNotes SEP8              120-44/256   -3/32     
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             1.9375       1.974     0.013
 Six-month bills               2.11         2.1622    0.020
 Two-year note                 99-210/256   2.5941    0.016
 Three-year note               99-216/256   2.6796    0.011
 Five-year note                99-106/256   2.7519    0.012
 Seven-year note               99-140/256   2.822     0.010
 10-year note                  100-52/256   2.8509    0.007
 30-year bond                  103-120/256  2.9493    0.005
         YIELD CURVE           Last (bps)   Net       
 10-year vs 2-year yield       25.50        -1.20     
 30-year vs 5-year yield       19.60        -0.40     
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        23.00        -0.50    
 U.S. 3-year dollar swap        19.75         0.25    
 U.S. 5-year dollar swap        13.75        -0.25    
 U.S. 10-year dollar swap        6.75        -0.25    
 U.S. 30-year dollar swap       -3.25         0.25    
 (Reporting by James Thorne; Editing by Daniel Bases and Nick
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