* Bargain-hunting after refunding fuels U.S. bond appetite
* Weaker-than-expected data raise doubts on number of rate
* Fed's Evans says could be okay with one more hike in 2017
* U.S. 10-year yield on track for biggest fall since
(Updates market action, adds quote)
By Richard Leong
NEW YORK, May 12 U.S. Treasury yields fell on
Friday, with their benchmark on track to post its biggest
one-day drop since March, as weaker-than-expected consumer price
and retail sales data diminished the view of a strong U.S.
economic rebound in the second quarter.
Demand for Treasuries was also stoked by bargain-minded
investors after a lukewarm reception this week to the $62
billion sale of three-year, 10-year and 30-year government debt,
analysts and traders said.
"It's a pretty clear data response, but it's not going to
take us out of the trading range that has been recently carved
out," said Blake Gwinn, U.S. rates strategist at NatWest Markets
in Stamford, Connecticut.
U.S. retail sales increased 0.4 percent last month, less
than the 0.6 percent gain forecast among economists polled by
Reuters, while the Consumer Price Index grew 2.2 percent on a
12-month basis through April, slower than March's 2.4 percent
The benchmark 10-year Treasury yield fell over 7
basis points to 2.326 percent. On Thursday, it reached 2.423
percent, a near six-week peak, in reaction to data showing a
surprisingly strong jump in U.S. producer prices in April.
The 30-year bond yield decreased 4 basis points
to 2.995 percent. It climbed to 3.059 percent on Thursday, which
was the highest since March 21, Reuters data showed.
U.S. yields rose broadly earlier this week on heavy
government and corporate bond supply. In addition, centrist
Emmanuel Macron's presidential win in France last Sunday spurred
investors to reduce their safe-haven bond holdings.
Last month's below-forecast retail and consumer price
figures did not change expectations that the Federal Reserve may
raise interest rates at its June 13-14 meeting by a quarter
point to 1.00-1.25 percent.
"The market is pretty well priced for a June rate hike,"
NatWest's Gwinn said.
However, the data trimmed the view that the U.S. central
bank could squeeze in at least one more rate hike after June and
before year-end as investors scaled back their expectations of a
strong bounce from anemic economic growth in the first quarter.
The interest rate futures market implied traders saw a 49
percent chance for two more rate hikes from the Fed by year-end
, down from 54 percent before Friday's data, CME Group's
FedWatch tool showed.
Chicago Fed President Charles Evan said on Friday he could
be okay with more rate increase in 2017, while the Fed will soon
need to begin considering the shrinking of its $4.5 trillion
May 12 Friday 12:57PM New York / 1657 GMT
US T BONDS JUN7 151-20/32 1
10YR TNotes JUN7 125-140/256 0-160/25
Price Current Net
Yield % Change
Three-month bills 0.8625 0.8763 -0.008
Six-month bills 1.0075 1.0266 -0.010
Two-year note 99-234/256 1.2945 -0.053
Three-year note 100-10/256 1.4866 -0.069
Five-year note 100-32/256 1.8484 -0.078
Seven-year note 99-40/256 2.131 -0.078
10-year note 100-108/256 2.3275 -0.072
30-year bond 100-68/256 2.9865 -0.053
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 24.50 -0.50
U.S. 3-year dollar swap 20.50 0.50
U.S. 5-year dollar swap 6.75 0.50
U.S. 10-year dollar swap -7.75 0.50
U.S. 30-year dollar swap -46.50 -0.25
(Reporting by Richard Leong; Editing by Dan Grebler and W