(Updates with market activity, adds analyst comment) BOSTON, Jan 14 (Reuters) - U.S. Treasury yields ticked down on Tuesday as investors took stock of a moderate rise in consumer prices and the expected signing of a trade deal between the United States and China. The benchmark 10-year yield was down 2.7 basis points in afternoon trading to 1.8214%, after beginning the session little changed. Consumer prices rose slightly less than expected in December and monthly underlying inflation pressures retreated, which could allow the Federal Reserve to keep interest rates unchanged at least through this year. The Labor Department said on Tuesday its consumer price index increased 0.2% last month, 10 basis points less than expected by economists polled by Reuters. Stan Shipley, macro research analyst for Evercore ISI, said the decline in Treasury yields reflected lower expectations for increases in the prices of goods and services that might juice economic activity. "There's no sign of inflation, it's completely missing in action," he said. The United States and China, the world's two biggest economies, are just a day away from signing a Phase 1 trade agreement. China has pledged to buy almost $80 billion of additional manufactured goods from the United States over the next two years as part of a trade war truce, a source told Reuters, a target that could provide a much-needed boost for planemaker Boeing Co but is being questioned by U.S. trade experts. U.S. stocks touched record highs on Tuesday, as stronger-than-expected earnings from JPMorgan and Citigroup added to optimism about the domestic economy.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down less than a basis point at 1.5781% in afternoon trading. Investors expect little change in the Fed's long-term strategy, said Lou Brien, market strategist for DRW Trading. "The data was muted, and muted data at this stage of the game means the Fed will be on the sidelines for an extended period," he said.
January 14 Tuesday 2:47PM New York / 1947 GMTPrice Current NetYield % Change
(bps)Three-month bills 1.54 1.5719 0.008Six-month bills 1.5325 1.5703 -0.003Two-year note 100-23/256 1.5781 -0.008Three-year note 99-190/256 1.5883 -0.014Five-year note 100-148/256 1.6281 -0.023Seven-year note 100-16/256 1.7404 -0.02710-year note 99-92/256 1.8214 -0.02730-year bond 102 2.2821 -0.025
DOLLAR SWAP SPREADSLast (bps) Net
Change (bps)U.S. 2-year dollar swap 5.75 0.00
spreadU.S. 3-year dollar swap 2.00 0.00
spreadU.S. 5-year dollar swap -0.25 0.50
spreadU.S. 10-year dollar swap -4.75 0.75
spreadU.S. 30-year dollar swap -31.50 1.00
(Reporting by Ross Kerber in Boston Editing by Nick Macfie and Matthew Lewis)