TREASURIES-Yields dip on month-end buying, U.S. inflation data

* Month-end buying for portfolio rebalancing pushes yields lower

* Year-over-year core PCE price index at 1.5 pct in April

* U.S. data stokes doubts over 2017 Fed rate hikes past June

NEW YORK, May 30 (Reuters) - U.S. benchmark and long-dated Treasury yields fell to their lowest levels in more than a week on Tuesday on month-end buying and after U.S. inflation data reinforced doubts that the Federal Reserve would raise interest rates more than one more time in 2017. Purchases of U.S. government debt for month-end portfolio rebalancing was the main catalyst for the move lower in yields, analysts said, while a drop in the core PCE price index to 1.5 percent in the 12 months through April from 1.6 percent in March reinforced views that the Fed might not raise rates again after June and contributed marginally to the yield drop. While the core PCE price index bounced back 0.2 percent after dipping 0.1 percent in March, the dip in the year-over-year reading stoked investor concerns about recent low U.S. inflation prints. The core PCE, which excludes food and energy, is the Fed's preferred inflation measure and the central bank has a 2 percent target. Benchmark 10-year U.S. Treasury yields touched 2.224 percent, their lowest in 11 days, while 30-year yields touched 2.885 percent to mark their lowest in 12 days. "More than anything, we're seeing just a little bit better buying here at a month-end extension," said John Briggs, head of strategy Americas at RBS Securities in Stamford, Connecticut. While the U.S. inflation data weighed further on investors' expectations for Fed rate increases this year past June, it did not alter expectations for a rate hike next month, with rates futures on Tuesday last implying traders saw a nearly 89 percent chance of a hike next month from about 88 percent on Friday according to CME Group's FedWatch tool. Those doubts that the Fed would hike rates again this year after June lingered even as Dallas Fed President Robert Kaplan told cable television network CNBC on Tuesday that he expected two more rate hikes this year. "June is priced in, but after that very little is priced in," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. Benchmark 10-year Treasuries were last up 6/32 in price to yield 2.227 percent, from a yield of 2.250 percent late Friday. Short-dated three-year Treasuries, which are more vulnerable to Fed rate hikes, were last up 1/32 in price to yield 1.446 percent, from a yield of 1.459 percent late Friday.

May 30 Tuesday 10:35AM New York / 1435 GMT Price

US T BONDS JUN7 154-16/32 0-19/32 10YR TNotes JUN7 126-92/256 0-44/256 Price Current Net Yield % Change


Three-month bills 0.93 0.945 0.010 Six-month bills 1.065 1.0855 0.010 Two-year note 99-234/256 1.2936 -0.008 Three-year note 100-42/256 1.443 -0.016 Five-year note 99-230/256 1.7713 -0.020 Seven-year note 99-184/256 2.0433 -0.022 10-year note 101-80/256 2.2272 -0.023 30-year bond 102-40/256 2.8919 -0.024


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 22.75 *****


U.S. 3-year dollar swap 20.75 ******


U.S. 5-year dollar swap 7.75 ******


U.S. 10-year dollar swap -5.50 ******


U.S. 30-year dollar swap -44.00 ******


(Reporting by Sam Forgione; Editing by Frances Kerry)