high@ (Repeats with no change in text)
* Expectations for more hawkish Fed boost short-dated yields
* 2-year yields hit highest in nearly 9 years
* U.S. import prices rise to highest since June 2016
* Long-term inflation indicators continue to lag
NEW YORK, Oct 17 (Reuters) - The U.S. Treasury yield curve flattened on Tuesday as 2-year yields rose to their highest level since November 2008 and yields on longer-dated maturities declined. Analysts said the spread compression between shorter- and longer-dated maturities was due to increased expectations for interest rate tightening by the Federal Reserve and minimal signs of a pick-up in long-term inflation, as indicators of U.S. price growth have been consistently weak this year. Yields on 5-year notes touched their highest level since Oct. 6 while 30-year yields fell to the lowest since Sept. 27. That pushed the yield spread between 5- and 30-year maturities to 83.94 basis points, the lowest since November 2007. The difference between yields of Treasuries maturing in two years and those maturing in 10 years fell to the lowest since August 2016. A report on Monday that Stanford University economist John Taylor had impressed in his meeting with President Donald Trump and was a viable nominee to succeed Fed Chair Janet Yellen accelerated the upward pace of short-dated Treasury yields. "Prior to this meeting the thinking was that Trump would want to pick someone relatively dovish because given his plans for fiscal policy that would line up better," said Tom Simons, money market economist at Jefferies and Co. in New York. "With Taylor coming into center stage not only is he hawkish but much more hawkish than the rest of the candidates being considered." Central bankers more concerned with maintaining low inflation favor higher interest rates, while dovish central bankers favor maintaining low unemployment with lower rates. Yellen on Sunday said the U.S economy remains strong and that she expects to continue gradual interest rate increases despite subdued inflation readings much of the year.
"Its a little bit of a convergence of expectations for Fed policy at the short end, which is getting more hawkish, not only Janet Yellen and what shes saying, but the potential for a Fed governor who could be even more hawkish," said Justin Hoogendoorn, head of fixed income strategy at Piper Jaffray & Co. in Chicago. Hoogendoorn highlighted technology, aging populations in large economies like the United States and Europe and global trade as headwinds to long-term inflation growth. Stronger-than-expected data on U.S. import prices also helped boost yields on shorter-dated maturities. The Labor Department said import prices jumped 0.7 percent last month, the biggest gain since June 2016, after an unrevised 0.6 percent rise in August.
(Reporting by Dion Rabouin; Editing by Chizu Nomiyama and Dan Grebler)