×

TREASURIES-Yield curve slightly steeper as oil prices recover

(Adds TIPS auction results, auction schedule; Updates prices)

* Yield curve steepens from almost 10-year lows

* 30-year TIPS auction sees strong demand

NEW YORK, June 22 (Reuters) - U.S. Treasury prices were stable to slightly lower on Thursday while the yield curve was slightly steeper, suggesting the flattening of the yield curve this week was stalling on a rise in oil prices. The yield curve between five-year notes and 30-year bonds briefly flattened to 94.9 basis points, the narrowest since December 2007, as 30-year Treasury yields hit more than a seven-month low of 2.713 percent. Later in the session, however, a recovery in U.S. crude prices from Wednesday's 10-month lows suggested greater inflationary pressures and pushed yields on long-dated bonds slightly higher. "At least today the long-end rally is taking a pause," said Stanley Sun, interest rate strategist at Nomura Securities International in New York.

The five-year, 30-year yield curve was last

96 basis points. Yields on U.S. 30-year U.S. Treasuries have fallen since data last week showed the so-called core Consumer Price Index rose the least since May 2015. Demand for a $5 billion sale of 30-year Treasury Inflation-Protected Securities (TIPS) on Thursday was nonetheless strong, resulting in a yield of 0.880 percent, lower than what traders had expected. The ratio of bids to the amount of 30-year TIPS offered was 2.83, or the highest in a year. The ratio was 2.25 at the prior 30-year TIPS auction in February. Analysts said yields on short-dated Treasuries, which are most sensitive to Federal Reserve policy, remained stable to slightly lower on skepticism that the U.S. central bank will raise interest rates again this year. "The timing for the next rate hike is definitely getting pushed out," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. "The market's not pricing in aggressive rate hikes." Federal Reserve Board Governor Jerome Powell, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester are all due to speak on Friday. The Treasury said on Thursday it will sell $88 billion in notes next week, including $26 billion in two-year notes on Monday, $34 billion in five-year notes on Tuesday and $28 billion in seven-year notes.

(Additional reporting by Richard Leong; Editing by Steve Orlofsky)

)