(New throughout, updates prices, market activity and comments; adds auction) By Karen Brettell NEW YORK, Aug 12 (Reuters) - U.S. Treasury yields dipped from one-month highs on Wednesday after the Treasury saw good demand for a record $38 billion auction of 10-year notes, but they remained higher on the day ahead of a 30-year bond auction on Thursday. The 10-year notes sold with a high yield of 0.677%, less than a basis point lower than where they had traded before the sale. Indirect bidders, which includes fund managers and other investors, bought 65% of the notes, a larger share than average. The auction “went off without a hitch,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. The Treasury last week increased auction sizes across the curve and said that it plans to continue to keep shifting more funding to longer-dated debt as it finances measures to offset the impact of the coronavirus epidemic. "This whole week we're dealing with supply coming into the market," said Tom Simons, a money market economist at Jefferies in New York. Benchmark 10-year note yields were last up one basis point at 0.670%, after getting as high as 0.691% before the auction, the highest since July 7. Analysts said Treasuries remain attractive as they pay higher yields than comparable overseas debt, and as concerns over renewed economic weakness fuels strong demand for safe-haven debt. The Federal Reserve has also committed to years of rock-bottom rates and is holding yields down through bond purchases. “If you look at us, (to) international buyers we’re 'cheap' on a relative basis, and every backup has been met by demand,” Lederer said. “I don’t think the market is ready to really justify significantly higher rates.” The Treasury will sell $26 billion in 30-year bonds on Thursday, which is a record large size for that tenor. A record $48 billion sale of three-year notes on Tuesday also drew solid demand. Yields rose earlier on Wednesday after data showed that U.S. consumer prices rose more than expected in July, with a measure of underlying inflation increasing by the most in 29-1/2 years. "This is a pretty surprising report," Simons said. However, "year-over-year, you still see pretty weak readings. You have to look at the overall economy and how much slack there is," Simons added. Treasuries have also weakened this week as risk appetite improved. The S&P 500 jumped on Wednesday, putting it just points away from its record closing high. August 12 Wednesday 3:00PM New York / 1900 GMT Price US T BONDS SEP0 178-26/32 -0-10/32 10YR TNotes SEP0 139-48/256 -0-16/25 6 Price Current Net Yield % Change (bps) Three-month bills 0.105 0.1065 -0.006 Six-month bills 0.12 0.1217 -0.002 Two-year note 99-239/256 0.1589 -0.002 Three-year note 99-208/256 0.1878 -0.001 Five-year note 99-198/256 0.296 0.006 Seven-year note 99-48/256 0.4938 0.007 10-year note 99-148/256 0.6697 0.012 20-year bond 99-204/256 1.1365 0.018 30-year bond 97-52/256 1.3647 0.018 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.50 -0.25 spread U.S. 3-year dollar swap 6.25 -0.25 spread U.S. 5-year dollar swap 4.50 -1.00 spread U.S. 10-year dollar swap -0.75 -0.75 spread U.S. 30-year dollar swap -40.50 -0.75 spread (Reporting by Karen Brettell; Editing by Will Dunham and David Gregorio)
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