TREASURIES-U.S. bond market rallies on jitters about Turkey

* Ten-year yield on track for biggest daily drop since late May

* U.S. core CPI comes in stronger-than-forecast in July

* Trump authorizes higher tariffs on Turkish steel, aluminum

* Overall solid August refunding underpins Treasuries demand

(Updates market action, adds quote) NEW YORK, Aug 10 (Reuters) - U.S. Treasury yields fell to near three-week lows on Friday as investors scooped up low-risk government debt on anxiety about Turkey's financial problems spreading to other emerging economies and lenders exposed to the sector. The benchmark 10-year yield is on track for its biggest one-day drop since late May as U.S. President Donald Trump escalated tension with Turkey, a NATO ally, by slapping higher tariffs on Turkish steel and aluminum imports. "Our relations with Turkey are not good at this time," Trump said on Twitter. In response, Turkey's finance minister Berat Albayrak rolled out the government's new economic plan on Friday, promising central bank independence and tighter budget discipline, but giving few details to reassure investors and stem a currency crisis. Rattled traders dumped more lira on Friday for its biggest single-day loss since Turkey adopted a floating-currency regime in 2001. "Clearly the currency took a beating. That had to raise eyebrows," said Jerry Paul, senior vice president of fixed income at ICON Advisers in Denver. "On top of that, you had Trump piling on with the tariff stuff. People say, 'I just want to be in a safe asset."' The yield on benchmark 10-year Treasury notes touched 2.870 percent, its lowest in almost three weeks. At 12:02 a.m. Eastern time (1602 GMT), it was down over 5 basis points at 2.880 percent, putting it on track for its steepest weekly fall in 11 weeks. Wall Street and other major stock markets fell on worries about Turkey and its woes hurting the global economy.

Friday's safe-haven bids for Treasuries added to earlier buying following perceived solid August government debt refunding where the government raised nearly $40 billion of fresh cash for spending and debt servicing. "The latest auction cycle went pretty well. Demand seems to be there. It's comforting for the market," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York. Friday's drop in U.S. bond yields was limited after data showed underlying domestic inflation grew a tad stronger than forecast in July, reducing bets price growth would weaken in coming months, analysts said. The core rate of the consumer price index (CPI), which excludes volatile food and energy prices, increased 0.2 percent in July, lifting its annual gain to 2.4 percent for its biggest gain since September 2008, the Labor Department said on Friday. August 10 Friday 12:03PM New York / 1603 GMT Price

US T BONDS SEP8 144-5/32 28/32 10YR TNotes SEP8 120-48/256 15/32 Price Current Net Yield % Change


Three-month bills 2.005 2.0427 -0.008 Six-month bills 2.17 2.224 -0.011 Two-year note 100-4/256 2.6165 -0.037 Three-year note 100-44/256 2.69 -0.052 Five-year note 99-254/256 2.7516 -0.061 Seven-year note 100-76/256 2.8276 -0.062 10-year note 99-244/256 2.8804 -0.055 30-year bond 99-64/256 3.0383 -0.047 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 26.30 -1.45 30-year vs 5-year yield 28.50 2.20


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 19.00 -0.25


U.S. 3-year dollar swap 16.75 0.50


U.S. 5-year dollar swap 13.00 0.75


U.S. 10-year dollar swap 5.50 0.00


U.S. 30-year dollar swap -7.25 -0.50


(Reporting by Richard Leong Editing by Chris Reese)