November 14, 2018 / 8:59 PM / in 7 months

TREASURIES-U.S. yields slide as Wall Street shares retreat

    * U.S. 30-, 10-, 2-year yields fall to 2-week lows
    * U.S. headline CPI rises in Oct; core CPI in line with
    * Wall Street shares fall, drag yields lower

 (Adds comment, updates prices, table)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 14 (Reuters) - U.S. Treasury yields fell on
Wednesday, as investors fretted about renewed weakness on Wall
Street, which could signal much deeper problems in the world's
largest economy.
    U.S. 30-year, 10-year, and two-year yields dropped to
two-week lows.
    Yields rallied earlier, bolstered by early gains in U.S.
stocks and continued optimism about Britain's exit from the
European Union.
    But the direction has since changed, as U.S. stock indexes
fell, with Apple Inc leading a decline in technology
stocks. The S&P 500 index also dropped for a fifth
session in a row, led by financials.
    "There is more thought that maybe there is something more to
the stock market's weakness, that maybe it's starting to signal
something about the economy, rather than just it being about
trading or moving positions around," said Lou Brien, market
strategist at DRW Trading in Chicago.
    In afternoon trading, benchmark 10-year Treasury note yields
fell to 3.117 percent, from 3.145 percent late on
Tuesday. Ten-year yields earlier dropped to a two-week low of
3.092 percent.
    "U.S. Treasury yields are finally breaking lower to reflect
distress in other markets that started Monday," said Jim Vogel,
interest rates strategist at FTN Financial in Memphis,
    "The build-up of two-way flows at 3.155 percent on 10s
forced today's buyers to crack the 3.13 percent barrier that
immediately gave way to 3.125 percent to rebalance technicals,"
he added.
    U.S. 30-year yields slipped to 3.350 percent,
after earlier sliding to a two-week trough of 3.334 percent, 
compared with Tuesday's 3.367 percent.
    On the short end, U.S. two-year yields fell to a
two-week low of 2.837 percent, down from 2.895 percent on
Tuesday. Two-year yields were last at 2.862 percent.
    Yields earlier gained some support from in-line U.S. core
inflation data for October, which should keep the Federal
Reserve firmly on track to raise interest rates next month and a
few more times in 2019.
    Data showed on Wednesday that the U.S. consumer price index
rose 0.3 percent last month after edging up 0.1 percent in
September. October's rise was the largest in nine months amid
gains in the cost of gasoline and rents.
    Excluding the volatile food and energy components, CPI
climbed 0.2 percent, after the so-called core CPI had gained 0.1
percent for two straight months.
    Andrew Hunter, U.S. economist at Capital Economics in
London, said despite the rise in prices, the rest of the CPI
report "supports our view that underlying inflation is unlikely
to rise much further."
    Hunter noted that the Fed will still likely continue hiking
rates once a quarter in the near term, with the next move coming
in December, but Fed officials won't hesitate to back away from
further tightening if economic growth slows.
      November 14 Wednesday 3:48PM New York / 2048 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             2.33         2.3764    -0.005
 Six-month bills               2.4575       2.523     -0.008
 Two-year note                 100-6/256    2.8622    -0.033
 Three-year note               99-224/256   2.9188    -0.033
 Five-year note                99-168/256   2.9498    -0.037
 Seven-year note               99-200/256   3.035     -0.033
 10-year note                  100-20/256   3.1158    -0.029
 30-year bond                  100-112/256  3.3518    -0.015
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap        19.00         0.25    
 U.S. 3-year dollar swap        16.25         0.00    
 U.S. 5-year dollar swap        14.00         0.75    
 U.S. 10-year dollar swap        6.25         0.50    
 U.S. 30-year dollar swap      -10.50        -0.25    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci
and James Dalgleish)
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