* 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. Treasuriesprices rose on Friday after U.S. producer price data signaledthe underlying domestic inflation trend remained muted due tosluggish demand, making long-dated debt attractive to investors.
Persistent worries on whether Spain will ask for afull-blown bailout to help its struggling economy also fedsafety bids for Treasuries, analysts said.
The U.S. government's producer price index rose 1.1 percentin September, largely due to a 9.8 percent jump in gasolineprices. However, bond traders focused on the index's core rate,which excluded volatile energy and food prices, and wasunchanged on the month.
"The fact that the core came in unchanged, that wassupportive 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 inprice, yielding 1.659 percent, 1 basis point lower thanThursday'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 withThursday's close at 2.848 percent.
Prices on other maturities were flat.
Longer-dated prices briefly retreated from earlier highsafter a private report showed consumer optimism improved to itsstrongest level in five years, reducing anxiety about a U.S.economic slowdown stemming partly from the fiscal woes inEurope.
Spain on Friday said a European bond-buying plan was fullyready for use and that there was absolutely no politicalresistance from within the euro zone to a Spanish bailoutrequest.
The Thomson Reuters/University of Michigan's preliminaryOctober reading on the overall index on consumer sentiment camein at 83.1, up from 78.3 the month before, marking the highestlevel 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 February2036 to August 2042 under its Operation Twist. The programinvolves selling shorter-dated Treasuries and buyinglonger-dated issues to try to hold down mortgage rates and otherlong-term borrowing costs to stimulate the economy.
(Reporting by Richard Leong; Editing by Leslie Adler)
((richard.leong@thomsonreuters.com)(+1 646 303 6313)(ReutersMessaging: richard.leong.thomsonreuters.com@thomsonreuters.net))
((-------MARKET SNAPSHOT AT 10:32 a.m. EDT (1432 GMT)-------Dec T-Bond149-21/32 (+13/32)Dec 10-Year note133-11/32 (+03/32)Change vs CurrentNyk yieldThree-month bills0.1 (+0.00) 0.102Six-month bills0.15 (+0.00) 0.152Two-year note99-31/32 (+) 0.266Five-year note99-27/32 (+) 0.65910-year note99-23/32 (+03/32) 1.65830-year bond98-14/32 (+12/32) 2.829DOLLAR SWAP SPREADSLAST ChangeU.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/