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Gertrude Chavez-Dreyfuss

Starved for yield? U.S. retail investors likely to seek Treasuries again this year

21 Mar 2019

NEW YORK U.S. mom-and-pop investors, the largest buyers of Treasuries last year, are likely to once again drive the flight to American government debt this year, as yields in the largest bond market are still higher than anywhere else, especially on the shortest maturities.

UPDATE 2-Foreigners sell U.S. Treasuries for 3rd month in January -data

16 Mar 2019

NEW YORK, March 15 Foreign investors sold U.S. Treasury bonds and notes for a third straight month in January, data from the U.S. Treasury department showed on Friday, a trend that has been in place for several years.

TREASURIES-U.S. 10-year yields sink to more than 2-month low ahead of Fed meeting

16 Mar 2019

* U.S. manufacturing production falls 0.4 pct in February * Focus on FOMC next week: analysts see rates on hold * Markets pricing in 38 pct chance of rate cut in 2019 * (Adds comments, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, March 15 Benchmark 10-year and 2-year U.S. Treasury yields on Friday dropped to their lowest levels since early January, weighed down by weaker-than-expected U.S. economic data that suggested the Federal Reserve will hold interest rates steady for the rest of the year. Expectations that the Federal Reserve will strike a dovish tone at next week's two-day policy meeting also pressured yields, analysts said. Both 10-year and 30-year U.S. yields have declined in seven of the last 10 sessions, reflecting a benign inflation outlook and slowing growth in the world's largest economy. Data showed on Friday that U.S. manufacturing output fell 0.4 percent in February, weakening for a second straight month, while factory activity in New York state was softer than expected this month with an index reading of 3.7. Following the data, U.S. 3- and 5-year yields briefly inverted, which could augur ill for the economy. Some analysts though said the movements between two short-dated maturities does not really offer a clear insight on the bond market's economic outlook. "The data was broadly disappointing ... and that's why we have seen this rally continue the way it has," said Ben Jeffery, analyst at BMO Capital Markets in New York. In afternoon trading, U.S. 10-year prices rose, as yields fell to 2.596 percent from 2.63 percent late on Thursday. Ten-year yields fell to a more than two-month low of 2.580 percent. U.S. 30-year bond yields dropped to 3.023 percent , from 3.046 percent on Thursday. At the short end of the curve, U.S. 2-year yields slipped to 2.446 percent, compared with Thursday's 2.461 percent , after earlier dropping to 2.430 percent, the lowest since January 4. U.S. yields did inch higher after the better-than-expected University of Michigan consumer sentiment report, which showed an index of 97.8, higher than the consensus forecast and the previous month's reading. With the data out of the way, investors are now bracing for a dovish statement after next week's Federal Reserve Open Market Committee meeting. Analysts unanimously expect the FOMC to leave policy rates unchanged. TD Securities in a research note said the market has priced in a 38 percent chance of a 25 basis-point rate cut by the end of 2019, which it believes is a overly pessimistic assessment. "Q1 US data has been weak, but it is far from collapsing," TD said. "Further, there were a few one-off shocks in terms of the shutdown and the weather, which should unwind in the coming months." Friday, March 15 at 1507 EDT (1907 GMT): Price Current Net Yield Change (pct) (bps) Three-month bills 2.3975 2.445 -0.007 Six-month bills 2.445 2.5093 -0.013 Two-year note 100-28/256 2.4419 -0.019 Three-year note 99-242/256 2.394 -0.024 Five-year note 99-230/256 2.3968 -0.033 Seven-year note 100-20/256 2.4876 -0.037 10-year note 100-76/256 2.5907 -0.039 30-year bond 99-164/256 3.0182 -0.028 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.75 1.00 spread U.S. 3-year dollar swap 9.75 0.75 spread U.S. 5-year dollar swap 6.50 0.25 spread U.S. 10-year dollar swap 1.50 0.50 spread U.S. 30-year dollar swap -23.00 -0.25 spread (Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan Oatis and Chizu Nomiyama)

TREASURIES-U.S. 2-year, 10-year yields tumble to more than two-month low

15 Mar 2019

By Gertrude Chavez-Dreyfuss NEW YORK, March 15 Benchmark 10-year and 2-year U.S. Treasury yields on Friday fell to their lowest levels since early January, weighed down by weaker-than-expected U.S. economic data that suggested the Federal Reserve will hold interest rates steady for the rest of the year. Expectations that the Federal Reserve will strike a dovish tone at next week's policy meeting also pressured yields, analysts said. Both U.S. 10-year and 30-year yields have declined in seven of the last 10 sessions, reflecting a benign inflation outlook and slowing growth in the world's largest economy. Data showed on Friday that U.S. manufacturing output fell 0.4 percent in February, falling for a second straight month, while factory activity in New York state was weaker than expected this month with a reading of 3.7. Following the data, U.S. 3- and 5-year yields briefly inverted, which could augur ill for the economy. Some analysts though said the movements between two short-dated maturities does not really offer a clear insight on the bond market's economic outlook. "The data was broadly disappointing ... and that's why we have seen this rally continue the way it has," said Ben Jeffery, analyst at BMO Capital Markets. In late morning trading, U.S. 10-year prices rose, as yields fell to 2.581 percent from 2.63 percent late on Thursday. Ten-year yields fell to a more than two-month low of 2.580 percent. U.S. 30-year bond yields were up at 3.007 percent , from 3.046 percent on Thursday. On the short end of the curve, U.S. 2-year yields slipped to 2.433 percent, compared with Thursday's 2.461 percent , after earlier dropping to 2.430 percent, the lowest since January 4. U.S. yields did inch higher after the better-than-expected University of Michigan consumer sentiment report, which showed an index of 97.8, higher than the consensus forecast and the previous month's reading. "As the weekend approaches, people are also setting up for what might be a dovish FOMC (Federal Reserve Open Monetary Policy Committee)" meeting, BMO's Jeffery said. Analysts unanimously expect the FOMC to leave policy rates unchanged. "The more interesting development will be what the 'dot-plot' signals about their intentions for the rest of the year," said Michael Feroli, chief U.S. economist at JP Morgan in New York. Fed officials' median projection on the number of rate increases is commonly referred to as its "dot-plot." "We suspect the median dot moves down from the two hikes they signaled in December to either no hikes or one hike for this year. We see somewhat higher odds of zero than one," Feroli said. March 15 Friday 10:47AM New York / 1447 GMT Price Current Net Yield % Change (bps) Three-month bills 2.395 2.4424 -0.010 Six-month bills 2.445 2.5093 -0.013 Two-year note 100-31/256 2.4357 -0.025 Three-year note 99-248/256 2.3858 -0.032 Five-year note 99-236/256 2.3917 -0.038 Seven-year note 100-32/256 2.4802 -0.045 10-year note 100-84/256 2.5871 -0.043 30-year bond 99-184/256 3.0143 -0.032 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 12.00 1.25 spread U.S. 3-year dollar swap 10.00 1.00 spread U.S. 5-year dollar swap 7.00 0.75 spread U.S. 10-year dollar swap 1.75 0.75 spread U.S. 30-year dollar swap -22.25 0.50 spread (Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan Oatis)

TREASURIES-U.S. prices fall on Japan selling, corporate bond supply

15 Mar 2019

* British lawmakers vote for Brexit delay * Japan selling ahead of fiscal year-end a market factor-analyst * Little impact from mixed U.S. economic data (Recasts, adds comment, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, March 14 U.S. Treasury prices dropped on Thursday in quiet trading overall, with the sharpest falls seen on the long end of the curve, pressured by corporate debt supply and some selling from Japanese investors ahead of Japan's fiscal year end this month. "There could be selling by Japanese investors on the long end," said Kim Rupert, managing director of global fixed income, at Action Economics in San Francisco. Japanese investors tend to sell foreign bonds and repatriate the proceeds ahead of their fiscal year end in an effort to bolster their balance sheets. Analysts also said heavy corporate bond issuance this week as well as in upcoming weeks has also been a factor in the Treasuries' sell-off. It has been a busy week for the investment-grade market, with 18 deals priced so far this week. Tighter credit spreads and a relatively stable stock market have contributed to the market. Analysts said the overall bias of the market has been for higher Treasury yields amid what is known as "rate-lock selling" during an expected heavy corporate issuance calendar. Wall Street dealers typically lock in borrowing costs for corporate bonds they are underwriting by selling Treasuries as a hedge before the deal is completed. Once the bond is sold, the dealer buys back Treasuries to exit the rate lock. Aside from corporate supply, the market has also been able to absorb $78 billion in U.S. Treasury debt this week, and there has been a little bit of aftereffect from that. Investors tend to sell Treasuries going into these auctions in order to secure a lower price when the sale begins. In afternoon trading, U.S. 10-year note prices fell, as yields rose to 2.628 percent from 2.610 percent late on Wednesday. U.S. 30-year bond yields were up at 3.044 percent from 3.01 percent on Wednesday. On the short end, U.S. 2-year yields advanced to 2.462 percent, compared with Wednesday's 2.453 percent. Also on Thursday, British lawmakers voted overwhelmingly to seek a delay in Britain's exit from the European Union, setting the stage for Prime Minister Theresa May to renew efforts to get her divorce deal approved by parliament next week. "The possible delay in Brexit takes away some of the uncertainty and adds the possibility of ending up having another referendum and possibly staying in," said Ellis Phifer, market strategist, at Raymond James in Memphis, Tennessee. Meanwhile, data showing a rise in U.S. weekly jobless claims and a sharp decline in new home sales had minimal impact on Treasuries, but they do support expectations that the Federal Reserve will hold interest rates throughout the year. March 14 Thursday 4:03 PM New York / 2003 GMT Price Current Net Yield % Change (bps) Three-month bills 2.3975 2.4455 -0.007 Six-month bills 2.45 2.515 -0.010 Two-year note 100-18/256 2.4627 0.010 Three-year note 99-224/256 2.4184 0.010 Five-year note 99-190/256 2.4304 0.016 Seven-year note 99-216/256 2.5245 0.020 10-year note 99-248/256 2.6285 0.019 30-year bond 99-32/256 3.0447 0.035 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.00 -0.25 spread U.S. 3-year dollar swap 9.50 0.50 spread U.S. 5-year dollar swap 6.50 0.00 spread U.S. 10-year dollar swap 1.00 0.00 spread U.S. 30-year dollar swap -22.25 -1.00 spread (Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan Oatis)

TREASURIES-U.S. yields inch up, but range-bound amid trade, Brexit uncertainty

14 Mar 2019

By Gertrude Chavez-Dreyfuss NEW YORK, March 14 U.S. Treasury yields were little changed to slightly higher on Thursday, but confined within narrow ranges, amid uncertainty regarding trade talks between the United States and China after a report said a deal is unlikely to happen this month, but in April. U.S. long-dated yields were the most affected by ongoing global tension, falling in seven of the last nine sessions. Worries about Britain's exit from the European Union have also added to the downward pressure on rates in the last few weeks. "When you look at Trump and Xi, it's clear that both parties want to make a trade deal here," said Brian Giuliano, vice president, portfolio management, at Brandywine Global Investment Management in Philadelphia, referring to U.S. President Donald Trump and Chinese President Xi Jinping. "But market sentiment has shifted on trade," he added, noting that reports about a trade agreement delay is a big deal to Treasury investors. "A year ago, trade policy was exacerbating volatility. Today, trade policy uncertainty is now one of the key drivers of volatility in the market," Giuliano said. Bloomberg on Thursday, citing unnamed sources, reported that a meeting between Trump and Xi to resolve the ongoing trade war conflict will not take place this month and is more likely to occur in April at the earliest. Aside from China, investors are closely watching Brexit as well. The British parliament is due to vote on Thursday on seeking a last-minute Brexit delay, while Prime Minister Theresa May piled renewed pressure on reluctant lawmakers to back her EU divorce deal at the third time of asking. "With no deep clarity as to the length of any such delay, we'd offer that the most growth-negative outcome would be the possibility of a series of rolling short-term extensions of a few months," said BMO Capital Markets in a research note. "This would serve to maintain high levels of uncertainty and perpetuate Brexit fatigue." In late morning trading, U.S. 10-year note yields edged up to 2.621 percent from 2.610 percent late on Wednesday. U.S. 30-year bond yields were up at 3.017 percent from 3.01 percent on Wednesday. On the short end of the curve, U.S. 2-year yields inched up to 2.456 percent, compared with Wednesday's 2.453 percent . Data showing a rise in U.S. weekly jobless claims and a sharp decline in new home sales had minimal impact on Treasuries, but they do support market expectations that the Federal Reserve will hold interest rates throughout the year. March 14 Thursday 10:52 AM New York / 1452 GMT Price Current Net Yield % Change (bps) Three-month bills 2.4 2.448 -0.004 Six-month bills 2.4475 2.5124 -0.013 Two-year note 100-20/256 2.4586 0.006 Three-year note 99-226/256 2.4157 0.008 Five-year note 99-196/256 2.4253 0.011 Seven-year note 99-228/256 2.5171 0.013 10-year note 100-8/256 2.6213 0.011 30-year bond 99-164/256 3.0183 0.008 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.50 0.25 spread U.S. 3-year dollar swap 9.50 0.50 spread U.S. 5-year dollar swap 6.50 0.00 spread U.S. 10-year dollar swap 1.25 0.25 spread U.S. 30-year dollar swap -21.25 0.00 spread (Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan Oatis)

TREASURIES-Yields rise as risk appetite improves, after soft U.S. 30-year auction

14 Mar 2019

* U.S. producer prices data showed tame reading * Market participants shrugging off Brexit for now * Focus on U.S. 30-year bond auction (Adds comment, auction results, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, March 13 U.S. Treasury yields rose on Wednesday after falling the previous session, as risk appetite improved and equity markets stabilized, with a poor 30-year bond auction further lifting rates. U.S. producer prices remained subdued in February, Wednesday's data showed, a day after consumer prices showed a soft reading. Both reports reinforced expectations the Federal Reserve will hold interest rates steady throughout the year after raising them four times in 2018. "After yesterday's CPI (consumer price index) data, yields fell. So some of these are just rebound after that," said Stan Shipley, fixed income strategist at Evercore ISI in New York. Shipley said, however, that in the midst of Brexit, the U.S. economy has slowed, but is not in terrible shape. Investors are keeping a close eye on the developments over Britain's exit from the European Union, Shipley said, noting any chaos or turmoil from Brexit would have limited impact on the United States. British lawmakers were set to vote on Wednesday against the threat of a 'no-deal' exit from the EU on March 29 after a second defeat for Prime Minister Theresa May's divorce agreement left Britain heading into the unknown. "The Brits are going to do what they're going to do and in the meantime, we just have to move on from it," Shipley added. In afternoon trading, U.S. 10-year note yields rose to 2.612 percent from 2.605 percent late on Tuesday. U.S. 30-year bond yields were up at 3.011 percent from 2.99 percent on Tuesday. But yields on both 10-year notes and 30-year bonds have fallen in six of the last eight sessions. Wednesday's U.S. 30-year auction was not nearly as strong as Tuesday's 10-year note sale. The auction stopped at 3.014 percent, higher than the expected rate at the bid deadline. There were almost $36.1 billion in bids for a 2.25 bid-to-cover ratio, below the prior 2.27, and the 2.31 average. On the short end of the curve, U.S. 2-year yields were up slightly at 2.458 percent, compared with Tuesday's 2.453 percent . Data showed on Wednesday that U.S. producer prices rose just 1.9 percent in the 12 months through February, the smallest increase since June 2017. That offset a report showing new orders for U.S.-made capital goods in January posted their largest increase in six months. The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rebounded 0.8 percent, the biggest gain since July. The reports had minimal impact on Treasuries overall. Wednesday, March 13, at 1458 EDT (1858 GMT): Price Current Net Yield Change (pct) (bps) Three-month bills 2.3975 2.4456 -0.014 Six-month bills 2.4525 2.5178 -0.014 Two-year note 100-23/256 2.4526 0.000 Three-year note 99-232/256 2.4076 -0.005 Five-year note 99-208/256 2.4152 0.001 Seven-year note 99-248/256 2.5048 0.003 10-year note 100-28/256 2.6123 0.007 30-year bond 99-200/256 3.0111 0.021 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.75 0.25 spread U.S. 3-year dollar swap 9.50 0.25 spread U.S. 5-year dollar swap 6.50 0.00 spread U.S. 10-year dollar swap 1.00 -0.25 spread U.S. 30-year dollar swap -21.50 -1.00 spread (Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Susan Thomas and James Dalgleish)

TREASURIES-Yields advance as risk appetite improves, ahead of supply

13 Mar 2019

* U.S. producer prices data showed tame reading * Market participants shrugging of Brexit for now * Focus on U.S. $30-year bond auction (Recasts, adds comment, Treasuries table, byline, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, March 13 U.S. Treasury yields rose on Wednesday, after falling the previous session, as risk appetite improved and equity markets steadied, although trading is likely to be rangebound due to a deepening political crisis in Britain over its plan to leave the European Union. U.S. producer prices remained subdued in February, Wednesday's data showed, a day after consumer prices showed a soft reading. Both reports reinforced expectations the Federal Reserve will hold interest rates steady throughout the year after raising them four times in 2018. "After yesterday's CPI (consumer price index) data, yields fell. So some of these are just rebound after that," said Stan Shipley, fixed income strategist, at Evercore ISI in New York. He also cited the British parliaments rejection of Prime Minister Theresa May's revised deal to leave the European Union as one of the reasons for the fall in yields on Tuesday. Shipley said, however, that in the midst of Brexit, the U.S. economy has slowed, but is not in terrible shape. "The Brits are going to do what they're going to do and in the meantime, we just have to move on from it," Shipley added. In late morning trading, U.S. 10-year note yields rose to 2.614 percent from 2.605 percent late on Tuesday. U.S. 30-year bond yields were up at 3.003 percent from 2.99 percent on Tuesday. Yields on both 10-year notes and 30-year bonds have fallen in six of the last eight sessions. On the short end of the curve, U.S. 2-year yields were up slightly at 2.458 percent, compared with Tuesday's 2.453 percent . Data showed on Wednesday that U.S. producer prices rose just 1.9 percent in the 12 months through February, the smallest increase since June 2017. That offset a report showing new orders for U.S.-made capital goods in January posted their largest increase in six months. The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rebounded 0.8 percent, the biggest gain since July. The reports had minimal impact on Treasuries overall. Investors are now bracing for the $16 billion auction of U.S. 30-year bonds later on Wednesday after a solid takedown of the Treasury's $10 billion note sale on Tuesday. Wednesday's price action suggested some concession going into the 30-year auction, with investors selling Treasuries so they can buy the bonds at lower prices later. "Even with 30-year yields near the lower bound of this year's range and with several (Federal Reserve Open Market)Committee members already expressing their view that we are at neutral rates, a 3 percent yield will attract buyers," said BMO Capital Markets in a note. March 13 Wednesday 10:43 AM New York / 1443 GMT Price Current Net Yield % Change (bps) Three-month bills 2.4025 2.4508 -0.009 Six-month bills 2.4525 2.5178 -0.014 Two-year note 100-20/256 2.4587 0.006 Three-year note 99-224/256 2.4184 0.005 Five-year note 99-202/256 2.4203 0.006 Seven-year note 99-236/256 2.5122 0.010 10-year note 100-24/256 2.6141 0.009 30-year bond 99-240/256 3.0031 0.013 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.75 0.25 spread U.S. 3-year dollar swap 9.25 0.00 spread U.S. 5-year dollar swap 6.50 0.00 spread U.S. 10-year dollar swap 1.00 -0.25 spread U.S. 30-year dollar swap -21.00 -0.50 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Jeffrey Benkoe and Susan Thomas)

TREASURIES-Yields fall after benign U.S. inflation data, Brexit woes

13 Mar 2019

* U.S. core, year-on-year CPI shows weak inflation * Brexit uncertainty weighs on U.S. yields * U.S. 10-year note auction shows strong demand (Adds comments, Brexit vote, auction results; updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, March 12 U.S. Treasury yields tumbled on Tuesday, pressured by weak inflation data for the world's largest economy, supporting expectations the Federal Reserve will hold interest rates steady this year, as well as worries about Britain's exit from the European Union. U.S. benchmark 10-year note yields slid to the lowest level in 10 weeks, while yields on 30-year bonds dropped to a three-week trough, also falling after a 10-year note auction showed strong demand. "There's probably some spillover from what's going on in Britain, specifically Brexit, because the headlines coming out of there have been profoundly discouraging," said Tom Simons, money market senior economist at Jefferies in New York. Any type of uncertainty or chaos arising from Brexit "would have an impact on global growth prospects," he said. Concerns about Britain's exit from the European Union boosted Treasury prices, which move inversely to yields, after the British Parliament rejected Prime Minister Theresa May's revised Brexit deal. In the United States, the Labor Department said its consumer price index rose 0.2 percent in February on higher costs of food, gasoline and rents. The index had been unchanged for the prior three months. Excluding the volatile food and energy components, the CPI edged up just 0.1 percent, the smallest increase since August 2018. In the 12 months through February, the CPI rose 1.5 percent, the smallest gain since September 2016. The data is yet another reason for the Fed to remain on hold, said Jon Hill, interest rates strategist at BMO Capital Markets in New York. The Fed raised rates four times in 2018. John Herrmann, rates strategist at MUFG Securities Americas, said his bank's models suggested the Fed will hold rates through the summer this year, followed by a shift to an easing monetary policy stance at the U.S. central bank's September policy meeting. In afternoon trading, U.S. 10-year note yields fell to 2.601 percent, down from 2.641 percent late on Monday. Earlier in the session yields hit a 10-week low. The Treasury's auction on Tuesday saw a solid takedown of the 10-year notes. The note was priced at 2.615 percent, lower than the 2.623 percent at the bid deadline. Bids totaled nearly $62.2 billion for a 2.59 cover, better than last month's 2.35, and higher than the 2.49 average. U.S. 30-year bond yields were down at 2.987 percent , from 3.032 percent on Monday, after earlier sliding to a three-week trough. On the short end of the curve, U.S. 2-year yields slipped to 2.450 percent, compared with Monday's 2.477 percent. March 12 Tuesday 3:20 PM New York / 1920 GMT Price Current Net Yield % Change (bps) Three-month bills 2.405 2.4535 -0.003 Six-month bills 2.46 2.5257 -0.004 Two-year note 100-24/256 2.4505 -0.026 Three-year note 99-232/256 2.4076 -0.036 Five-year note 99-218/256 2.4068 -0.033 Seven-year note 100-4/256 2.4975 -0.035 10-year note 100-52/256 2.6015 -0.039 30-year bond 100-52/256 2.9896 -0.042 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.50 -0.75 spread U.S. 3-year dollar swap 9.25 0.25 spread U.S. 5-year dollar swap 6.75 -0.50 spread U.S. 10-year dollar swap 1.25 -0.50 spread U.S. 30-year dollar swap -20.25 -0.50 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Leslie Adler)

TREASURIES-Yields slip after tame U.S. inflation data, Brexit worries

12 Mar 2019

* U.S. core, year-on-year CPI shows weak inflation * Brexit hangs in the balance, weighs on U.S. yields * Focus on U.S. 10-year note auction (Adds comment, Treasuries table, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, March 12 U.S. Treasury yields drifted lower on Tuesday after data showed tame inflation in the world's largest economy in February, backing expectations the Federal Reserve will hold interest rates steady this year after hiking rates four times in 2018. U.S. long-dated yields fell in six of the last seven sessions, while those on two-year notes, the security most sensitive to interest rate moves, dropped in five of the last seven. Concerns about Britain's exit from the European Union also weighed on U.S. yields, boosting Treasury prices, ahead of a parliamentary vote on British Prime Minister Theresa May's revised deal. Analysts were concerned May's deal could be defeated by lawmakers. In the United States, the Labor Department said on Tuesday its consumer price index grew 0.2 percent in February due to gains in the costs of food, gasoline and rents. The index was unchanged for three straight months. Excluding the volatile food and energy components, the CPI edged up just 0.1 percent, the smallest increase since August 2018. In the 12 months through February, the CPI rose 1.5 percent, the smallest gain since September 2016. "All in all, yet another reason for the Fed to remain on hold as inflationary pressures fail to manifest," said Jon Hill, interest rates strategist, at BMO Capital Markets in New York. In early trading, U.S. 10-year note yields fell to 2.633 percent, down from 2.641 percent late on Monday. U.S. 30-year bond yields were down at 3.027 percent , from 3.032 percent on Monday. On the short end of the curve, U.S. 2-year yields slipped to 2.464 percent, compared with Monday's 2.477 percent. Market participants were also bracing for the auction of $24 billion in U.S. 10-year notes. Investors typically sell the note going into an auction in order to buy them back at lower prices in a practice called "concession." But given the overall benign U.S. inflation data and worries about Brexit, investors bought Treasuries instead. BMO's Hill said, however, that the 10-year note has already seen a slight concession built into pricing after a weak U.S. non-farm payrolls report last Friday. He said the "Brexit vote occurring shortly after the auction close remains a confounding factor." March 12 Tuesday 9:52 AM New York / 1352 GMT Price Current Net Yield % Change (bps) Three-month bills 2.4025 2.4509 -0.006 Six-month bills 2.46 2.5257 -0.004 Two-year note 100-16/256 2.467 -0.010 Three-year note 99-214/256 2.4321 -0.012 Five-year note 99-190/256 2.4303 -0.010 Seven-year note 99-224/256 2.5196 -0.012 10-year note 99-240/256 2.6321 -0.009 30-year bond 99-124/256 3.0262 -0.006 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.50 -0.75 spread U.S. 3-year dollar swap 8.75 -0.25 spread U.S. 5-year dollar swap 6.75 -0.50 spread U.S. 10-year dollar swap 1.25 -0.50 spread U.S. 30-year dollar swap -20.50 -0.75 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette Baum)

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