TREASURIES-Long-dated prices rise on muted inflation view
* U.S. core producer prices unchanged in September
* Bonds pare gains after unexpectedly strong consumer data
* Worries persist over whether Spain will request aid
* Fed to buy up to $2.25 billion in long-dated bonds
(Updates market action after consumer data; adds quote)
By Richard Leong
NEW YORK, Oct 12 (Reuters) - Longer-dated U.S. Treasuries prices rose on Friday after U.S. producer price data signaled the underlying domestic inflation trend remained muted due to sluggish demand, making long-dated debt attractive to investors.
Persistent worries on whether Spain will ask for a full-blown bailout to help its struggling economy also fed safety bids for Treasuries, analysts said.
The U.S. government's producer price index rose 1.1 percent in September, largely due to a 9.8 percent jump in gasoline prices. However, bond traders focused on the index's core rate, which excluded volatile energy and food prices, and was unchanged on the month.
"The fact that the core came in unchanged, that was supportive for the long-end of the market," said Larry Milstein, head of U.S. government and agency trading at R.W. Pressprich & Co. in New York.
Benchmark 10-year Treasury notes
rose 2/32 in price, yielding 1.659 percent, 1 basis point lower than Thursday's close.
The 30-year bond
was up 11/32 in price, rebounding from an earlier 18/32 decline in overseas trading. The 30-year yield was last 2.830 percent, compared with Thursday's close at 2.848 percent.
Prices on other maturities were flat.
Longer-dated prices briefly retreated from earlier highs after a private report showed consumer optimism improved to its strongest level in five years, reducing anxiety about a U.S. economic slowdown stemming partly from the fiscal woes in Europe.
Spain on Friday said a European bond-buying plan was fully ready for use and that there was absolutely no political resistance from within the euro zone to a Spanish bailout request.
The Thomson Reuters/University of Michigan's preliminary October reading on the overall index on consumer sentiment came in at 83.1, up from 78.3 the month before, marking the highest level since September 2007.
On the supply front, the Federal Reserve was set to buy $1.75 billion to $2.25 billion in Treasuries due in February 2036 to August 2042 under its Operation Twist. The program involves selling shorter-dated Treasuries and buying longer-dated issues to try to hold down mortgage rates and other long-term borrowing costs to stimulate the economy.
(Reporting by Richard Leong; Editing by Leslie Adler)
((richard.leong@thomsonreuters.com)(+1 646 303 6313)(Reuters Messaging: richard.leong.thomsonreuters.com@thomsonreuters.net))
((-------MARKET SNAPSHOT AT 10:32 a.m. EDT (1432 GMT)------- Dec T-Bond 149-21/32 (+13/32) Dec 10-Year note 133-11/32 (+03/32) Change vs Current Nyk yield Three-month bills 0.1 (+0.00) 0.102 Six-month bills 0.15 (+0.00) 0.152 Two-year note 99-31/32 (+) 0.266 Five-year note 99-27/32 (+) 0.659 10-year note 99-23/32 (+03/32) 1.658 30-year bond 98-14/32 (+12/32) 2.829 DOLLAR SWAP SPREADS LAST Change U.S. 2-year dollar swap spread 10.75 (-1.25) U.S. 3-year dollar swap spread 10.50 (-0.50) U.S. 5-year dollar swap spread 12.75 (unch) U.S. 10-year dollar swap spread 4.75 (+0.50)
U.S. 30-year dollar swap spread -23.00 (+0.50)))
Keywords: MARKETS USA BONDS/