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TREASURIES-U.S. bond yields rise on federal, corporate supply

* U.S. to sell $12 bln 30-year bond supply at 1 p.m. (1700 GMT)

* Companies have raised $26 bln in corporate bond market

* U.S. August producer price data support benign inflation view

NEW YORK, Sept 13 (Reuters) - U.S. Treasury yields rose on Wednesday with 10-year yield hitting a 2-1/2 week high as investors reduced their bond holdings to make room for this week's government and corporate debt supply. A powerful rebound in stock prices around the world with Wall Street's major indexes setting record highs on Tuesday also underpinned the bounce in bond yields, analysts said. Investors unloaded equities and other risky assets last week on concern about the potential for massive damage from Hurricane Irma and tension between North Korea and the United States and its allies over Pyongyang's nuclear weapons program.

Safe-haven buying of Treasuries knocked the benchmark 10-year yield to a 10-month low, just above 2 percent on Friday before turning higher this week on reduced tension between Washington and Pyongyang and early signs that destruction from Irma in the United States is not as devastating as some had feared. "The bond market is comfortable in a 2.10-2.30 percent range. We need new stresses to push it out of that range," said Matt Toms, chief investment officer of fixed income at Voya Investment Management in Atlanta. At 11:00 a.m. (1500 GMT), the 10-year yield was 2.179 percent, up almost 1 basis point from late on Tuesday and just marginally below a 2-1/2 week peak. The 30-year bond yield hovered near a three-week peak at 2.778 percent in advance of a $12 billion auction of long bond supply at 1 p.m. (1700 GMT). The latest 30-year supply was the final leg of this week's $56 billion in coupon-bearing Treasuries supply. It followed softly bid auctions of three-year and 10-year debt. In "when-issue" activity, traders expected the latest 30-year supply to sell at a yield of 2.778 percent , which would be the lowest since October, Tradeweb data showed. In the corporate sector, companies have raised about $26 billion through the sales of investment-grade and high-yield debt this week, according to IFR, a Thomson Reuters unit.

On the data front, domestic producer prices grew 0.2 percent in August, less than the 0.3 percent increase forecast among analysts polled by Reuters. This latest reading reinforced the view that domestic inflation would remain below the Federal Reserve's 2-percent goal longer than previously thought. This benign inflation outlook should help hold down long-term bond yields, analysts said. "There is a lack of fear of inflation in the bond market. There's no credible case for inflation to increase," Toms said. September 13 Wednesday 11:00 AM New York / 1500 GMT Price

US T BONDS DEC7 155-5/32 -0-3/32 10YR TNotes DEC7 126-140/256 -0-24/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 1.03 1.047 0.003 Six-month bills 1.1475 1.1702 0.007 Two-year note 99-206/256 1.3512 0.016 Three-year note 99-176/256 1.4819 0.016 Five-year note 99-88/256 1.7637 0.017 Seven-year note 99-48/256 2.0006 0.009 10-year note 100-160/256 2.1795 0.009 30-year bond 99-120/256 2.7762 0.001

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 23.50 0.25

spread

U.S. 3-year dollar swap 19.75 0.50

spread

U.S. 5-year dollar swap 7.25 0.50

spread

U.S. 10-year dollar swap -4.50 0.75

spread

U.S. 30-year dollar swap -34.50 1.00

spread

(Reporting by Richard Leong)