June 22, 2017 / 7:17 PM / 3 months ago

TREASURIES-Yield curve slightly steeper as oil prices recover

 (Adds TIPS auction results, auction schedule; Updates prices)
    * Yield curve steepens from almost 10-year lows
    * 30-year TIPS auction sees strong demand

    By Sam Forgione and Karen Brettell
    NEW YORK, June 22 (Reuters) - U.S. Treasury prices were
stable to slightly lower on Thursday while the yield curve was
slightly steeper, suggesting the flattening of the yield curve
this week was stalling on a rise in oil prices.
    The yield curve between five-year notes and 30-year bonds
               briefly flattened to 94.9 basis points, the
narrowest since December 2007, as 30-year Treasury yields hit
more than a seven-month low of 2.713 percent.
    Later in the session, however, a recovery in U.S. crude
prices from Wednesday's 10-month lows suggested greater
inflationary pressures and pushed yields on long-dated bonds
slightly higher.
    "At least today the long-end rally is taking a pause," said
Stanley Sun, interest rate strategist at Nomura Securities
International in New York.
    The five-year, 30-year yield curve                was last
96 basis points.
    Yields on U.S. 30-year U.S. Treasuries have fallen since
data last week showed the so-called core Consumer Price Index
rose the least since May 2015.             
    Demand for a $5 billion sale of 30-year Treasury
Inflation-Protected Securities (TIPS) on Thursday was
nonetheless strong, resulting in a yield of 0.880 percent, lower
than what traders had expected.
    The ratio of bids to the amount of 30-year TIPS offered
             was 2.83, or the highest in a year. The ratio was
2.25 at the prior 30-year TIPS auction in February.             
    Analysts said yields on short-dated Treasuries, which are
most sensitive to Federal Reserve policy, remained stable to
slightly lower on skepticism that the U.S. central bank will 
raise interest rates again this year.
    "The timing for the next rate hike is definitely getting
pushed out," said Subadra Rajappa, head of U.S. rates strategy
at Societe Generale in New York. "The market's not pricing in
aggressive rate hikes."
    Federal Reserve Board Governor Jerome Powell, St. Louis Fed
President James Bullard and Cleveland Fed President Loretta
Mester are all due to speak on Friday.
    The Treasury said on Thursday it will sell $88 billion in
notes next week, including $26 billion in two-year notes on
Monday, $34 billion in five-year notes on Tuesday and $28
billion in seven-year notes.

 (Additional reporting by Richard Leong; Editing by Steve
Orlofsky)
  
 
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