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* 10-yr note yields lowest since Oct, 30-year yields lowest since June
* U.S. economic data overall solid, Greek bond yields rise
* Speculative short covering seen sending yields lower
NEW YORK, May 15 (Reuters) - Benchmark U.S. Treasuries yields fell to six month lows on Thursday in heavy volume after Greek government bonds weakened and sparked safety buying of U.S. debt, even though U.S. economic data pointed overall to a firming economy. The size of the rally provoked head scratching by many analysts trying to pinpoint the exact impetus for the move, with a large amount of short covering seen exacerbating the fall in yields. "There has been a little bit of a breakdown in European peripheral debt, that seemed to set off a little bit of a 'risk off' trade...despite the fact that we got a firm set of data this morning," said Dan Mulholland, managing director in Treasuries trading at BNY Mellon in New York. New applications for U.S. unemployment benefits hit a seven-year low last week while consumer prices recorded their largest increase in 10 months in April. Factory activity in New York state expanded at its quickest pace in nearly four years in May, but another report showed a surprise slump in industrial output last month. Greek government debt yields meanwhile rose to a two-month high with traders citing a document detailing a retroactive tax on non-resident holders of Greek bonds, which Greece's government then denied. Treasuries have rallied even as many investors see yields as likely to rise as the economy gains momentum. Some of the gains are due to the expectation that central banks globally will continue to provide loose monetary conditions, with the European Central Bank expected to cut interest rates next month. But a record number of speculators betting on bond yield increases is also increasingly seen as behind the bond rally, throwing the market off balance and sending yields lower regardless of what the U.S. economic data shows. "The short positioning in the street has been really quite severe," said Aaron Kohli, an interest rate strategist at BNP Paribas in New York. "Too many people got short early and now there is no one left to follow them into the trade and they are covering themselves." Data last Friday showed that speculators' net bearish bets in Eurodollar futures rose to a record high in the previous week following an unexpectedly strong reading on U.S. payrolls in April, according to Commodity Futures Trading Commission.
Bearish bets on five-year and ten-year Treasuries futures have also increased in recent weeks. Benchmark 10-year notes were last up 13/32 in price to yield 2.497 percent, after falling as low as 2.473, the lowest since October 30. Thirty-year bonds were last up 23/32 in price to yield 3.336 percent, after earlier falling as low as 3.303 percent, the lowest since June.
(Editing by Diane Craft)