TREASURIES-U.S. bond yields edge up on economic data, supply pressure

Reuters - UK Focus

* Dealers sales of this week's supply pressure yields higher

* Long-dated Treasuries on track as top U.S. bonds in May

* Benchmark yields not far above their 11-month lows (Updates market action, adds quote)

By Richard Leong

NEW YORK (Frankfurt: HX6.F - news) , May 30 (Reuters) - Benchmark U.S. Treasuriesyields rose on Friday as the investor demand that stoked May'sbond rally faded and Wall Street dealers sought to resell theirshare of this week's $95 billion in fixed-rate government debtsupply.

The rise in Treasuries yields accelerated on a surprisepickup in a private measure of U.S. Midwest business activitiesin May, supporting the view of a solid economic rebound in thesecond quarter after a contraction in the first quarter duepartly to a harsh winter.

"You had a redistribution of supply yesterday and thatseemed to have continued," said Larry Milstein, head of U.S.government and agencies trading at R.W (SES: E2:OJ4.SI - news) . Pressprich & Co. in NewYork.

Longer-dated yields did not stray far above the 11-monthlows they set earlier this week on some doubts about the U.S.economic recovery and bets that the European Central Bank mightembark on an aggressive stimulus program next week that couldend up lowering U.S. and euro zone yields.

"It's mostly about the ECB. The court is for the ECB torelinquish," said Jim Vogel, interest rate strategist at FTNFinancial in Memphis, Tennessee.

Treasuries lagged German Bunds with their 10-year yieldspread widening a tad from their tightest level in more than2-1/2 months to 1.10 percent.

A late smattering of buying for month-end portfoliorebalancing emerged, pushing yields from their earlier highs.

The yield on benchmark 10-year U.S. Treasuries ended at 2.459 percent, up 1 basis point from Thursday when ithit 2.422 percent, which was the lowest since last June.

The yield on the 30-year bond last traded at3.316 percent, up 1 basis point from Thursday when it fell to3.278 percent, an 11-1/2-month low.

Despite the modest market pullback, Treasuries were on trackto produce another month of solid returns. So far in May, theyhave generated a total return of 0.99 percent, according to anindex compiled by Barclays (LSE: BARC.L - news) .

The bank's index on Treasuries that mature in 20 years orlonger has risen 3.18 percent month-to-date, which would be thebest performance among U.S. bonds in May.

On the data front, U.S. Midwest business activityaccelerated in May to its strongest since October, the Institutefor Supply Management-Chicago said on Friday.

Other news on the U.S. economy was mixed.

Thomson Reuters (Frankfurt: TOC.F - news) and the University of Michigan's final Mayreading on U.S. consumer sentiment was a bit below forecast,while the government said personal spending unexpectedly dipped0.1 percent in April, raising some concerns about growth in thesecond quarter. (Reporting by Richard Leong; Editing by Paul Simao and ChizuNomiyama)

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