TREASURIES-Yields advance after rising U.S. inflation

(Adds comment; updates prices, table) NEW YORK, Feb 14 (Reuters) - U.S. Treasury yields on most maturities rose on Wednesday, with those on benchmark 10-year notes hitting a four-year high, boosted by data showing consumer prices in the world's largest economy gained more than expected last month, with underlying inflation posting its largest monthly increase in a year. The report appeared to cement expectations of a rate hike by the Federal Reserve in March despite U.S. retail sales posting their largest decline in 11 months. Wednesday's data showed that the consumer price index increased 0.5 percent in January, with households paying more for gasoline and rent, compared with a 0.2 percent rise in December. Excluding the volatile food and energy components, the CPI grew 0.3 percent, the biggest increase since January 2017, compared with 0.2 percent growth in December. Investors have agonized in the last two weeks over the prospect of rising inflation after the January jobs reported showed a 2.9 percent increase in wages. The fear was that quicker inflation would lead to higher interest rates, raising borrowing costs for both individuals and corporations. The CPI data has been offset, however, by a report indicating that U.S. retail sales fell 0.3 percent last month, the biggest decline in 11 months. Data for December was revised to show sales unchanged instead of rising 0.4 percent as previously reported. Fed funds futures on Wednesday priced in a more than 80 percent chance of an interest rate increase at next month's Fed policy meeting, and a roughly 60 percent possibility of a move in June, according to the CME's FedWatch. "Today's results fit the recent narrative that rates are moving higher on inflation concerns, and risk assets, or at least equity values have become sensitive to those higher yields," said Marvin Loh, senior global market strategist at BNY Mellon in Boston. "While CPI gains were the focus, the poor retail sales results have added an additional complexity of at least questioning the strength of the consumer entering 2018." In early afternoon trading, U.S. benchmark 10-year Treasury note yields rose to 2.905 percent, from 2.84 percent late on Tuesday. Earlier in the session, 10-year yields hit a four-year peak of 2.911 percent. U.S. 30-year yields increased to 3.173 percent from Tuesday's 3.128 percent. U.S. 2-year yields, the maturity most sensitive to rate-hike expectations, advanced to a two-week high of 2.172 percent, compared with 2.106 percent on Tuesday. Two-year yields were last at 2.163 percent.

Wednesday, Feb. 14 1404 EST (1904 GMT): Price

US T BONDS MAR8 143-15/32 -1-3/32 10YR TNotes MAR8 120-108/256 -0-148/256 Price Current Net Yield Change (pct) (bps) Three-month bills 1.5625 1.5905 -0.018 Six-month bills 1.7625 1.803 0.000 Two-year note 99-174/256 2.1677 0.062 Three-year note 99-154/256 2.3884 0.076 Five-year note 98-210/256 2.6302 0.081 Seven-year note 97-244/256 2.826 0.075 10-year note 98-168/256 2.9058 0.066 30-year bond 96-164/256 3.1745 0.046


Last (bps) Net Change


U.S. 2-year dollar swap 27.00 1.75


U.S. 3-year dollar swap 18.75 1.25


U.S. 5-year dollar swap 9.50 0.50


U.S. 10-year dollar swap 1.50 1.00


U.S. 30-year dollar swap -16.50 1.50


(Reporting by Gertrude Chavez-Dreyfuss, editing by G Crosse)