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TREASURIES-Yield curve steepens slightly on rise in oil prices

* Rebound in oil prices pressures 30-year yields higher

* Profit-taking on 30-year bonds also pushes yields higher

* Rate hike specticism keeps short-dated yields depressed

* Traders await 30-year TIPS auction

NEW YORK, June 22 (Reuters) - Yields on short-dated U.S. Treasuries were stable to slightly lower on Thursday while those on long-dated issues edged higher, suggesting the flattening of the yield curve this week was stalling on profit-taking as well as 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. That trading pattern was unwound later in the session, however, as 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. U.S. 30-year U.S. Treasury yields have fallen in recent days on worries about slowing U.S. inflation. Data last week showed the so-called core Consumer Price Index (CPI) posted its smallest rise since May 2015. In addition to the bounce in oil prices, analysts said traders were taking profits from the recent rally in 30-year bonds. The uptick in 30-year debt yields also occurred as traders prepared for a 30-year Treasury Inflation-Protected Securities (TIPS) auction later on Thursday. Traders typically sell Treasuries ahead of auctions to make way for the new supply of government debt, pushing yields 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. U.S. 30-year Treasuries were last down 6/32 in price to yield 2.733 percent, from a yield of 2.724 percent late on Wednesday. U.S. three-year Treasuries were last up slightly in price to yield 1.492 percent, from a yield of 1.497 percent late on Wednesday. Analysts said yields on short-dated Treasuries, which are most sensitive to Federal Reserve policy, were remaining stable to slightly-lower on skepticism that the U.S. central bank would be able to 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." Benchmark 10-year Treasuries were last down 3/32 in price to yield 2.165 percent, from a yield of 2.155 percent late on Wednesday. U.S. two-year notes were last roughly flat in price to yield 1.352 percent.

June 22 Thursday 10:54AM New York / 1454 GMT Price

US T BONDS SEP7 156-10/32 -0-6/32 10YR TNotes SEP7 126-152/256 -0-20/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 0.9575 0.9731 -0.021 Six-month bills 1.0925 1.1138 -0.010 Two-year note 99-206/256 1.3524 0.000 Three-year note 100-6/256 1.4919 -0.005 Five-year note 99-230/256 1.7715 0.003 Seven-year note 100-12/256 1.9926 0.008 10-year note 101-224/256 2.1633 0.008 30-year bond 105-120/256 2.7311 0.007

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 19.50 0.50

spread

U.S. 3-year dollar swap 16.00 0.75

spread

U.S. 5-year dollar swap 5.25 0.00

spread

U.S. 10-year dollar swap -4.25 -0.50

spread

U.S. 30-year dollar swap -34.00 -0.50

spread

(Reporting by Sam Forgione; Editing by Paul Simao)