TREASURIES-U.S. yields fall as tame inflation keeps Fed on slow rate-hike path


* Fed raises rates as expected, keeps 3 rate-hike view for 2018

* CPI core rate moderates in November, falls short of forecasts

* Republicans strike deal on tax-cut plan after Alabama election

* Fed's Yellen sees U.S. yield curve flatter than in the past

(Updates market action, adds quote, graphic) NEW YORK, Dec 13 (Reuters) - U.S. Treasury yields fell on Wednesday as a report on consumer prices in November fell short of analysts' forecasts, reducing bets on a broad pickup in inflation and supporting the view the Federal Reserve would remain on a gradual rate-hike path. The U.S. central bank, as expected, raised its target range on short-term rates for a third time in 2017 to 1.25-1.50 percent Policy-makers stuck to their median view that the Fed would raise rates another three times in 2018 as they upgraded their growth outlook based in part on possible fiscal stimulus from Washington. Congressional Republicans struck a deal on final tax legislation on Wednesday following Democrat Doug Jones' victory in the special U.S. Senate election in Alabama on Tuesday. The upset narrowed the Republicans' Senate majority to just 51-49, turning up the pressure on them to pass their tax plan by year-end. Despite a tightening labor market and a possible boost from lower taxes, the Fed policy-makers did not alter their view on inflation. This spurred traders to exit earlier bets on a faster pace of rate hikes after 2018, resulting in the shorter-dated yields to fall more than longer-dated ones. "We don't see a great acceleration in inflation. There is no need for the Fed to hike faster," said Gennadiy Goldberg, interest rate strategist at TD Securities in New York. Earlier Wednesday, data showed the core consumer prices, which excludes volatile energy and food prices, moderated to 0.1 percent from a 0.2 percent increase in October and below market expectations. The benchmark 10-year Treasury yield was 2.344 percent, down nearly 6 basis points from Tuesday after touching a near two-week high at 2.426 percent earlier Wednesday. The two-year yield touched nine-plus year peak at 1.852 percent before retreating to 1.778 percent, down 5 basis points, while the five-year yield pulled back from a 6-1/2 year high to 2.108 percent, down 6 basis points. After the Fed's latest statement and projections, Janet Yellen, in her last press conference as Fed chief, said the yield curve will likely be flatter than in the past, which she attributed partly on stubbornly low inflation. "The yield curve will continue to flatten, but we caution in the short term, it will overshoot. There might be room to steepen a bit," said Neil Sutherland, portfolio manager at Schroders in New York. The yield spread between five-year and 30-year Treasuries grew to 62 basis points from about 60 basis points on Tuesday, Tradeweb data showed.

Wednesday, Dec. 13 at 1610 EST (2110 GMT): Price

US T BONDS MAR8 153-22/32 1-1/32 10YR TNotes MAR8 124-160/256 0-128/25


Price Current Net Yield % Change


Three-month bills 1.2825 1.3045 -0.039 Six-month bills 1.43 1.4604 -0.029 Two-year note 99-242/256 1.7784 -0.053 Three-year note 99-240/256 1.8965 -0.056 Five-year note 99-124/256 2.1099 -0.062 Seven-year note 99-44/256 2.2541 -0.061 10-year note 99-36/256 2.3475 -0.056 30-year bond 100-100/256 2.7307 -0.050 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 56.80 -0.20 30-year vs 5-year yield 62.00 1.75


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 20.50 1.25


U.S. 3-year dollar swap 17.50 1.00


U.S. 5-year dollar swap 6.25 0.50


U.S. 10-year dollar swap 0.25 0.00


U.S. 30-year dollar swap -20.50 -0.75


(Reporting by Richard Leong; Editing by Alistair Bell)