TREASURIES-U.S. bond yields rise 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

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 further and Wall Street dealers sought toresell their share of this week's $95 billion in fixed-rategovernment debt supply.

The rise in Treasuries yields accelerated on a surpriseincrease in a private measure on U.S. Midwest businessactivities in March, supporting the view of a solid economicrebound in the second quarter after a contraction in the firstquarter due partly 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 were not too far above the 11-month lowsthey 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.

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 open market, the yield on benchmark 10-year U.S.Treasuries was last at 2.480 percent, up 3 basispoints from late Thursday. It hit 2.422 percent on Thursday,which was the lowest since last June.

The yield on the 30-year bond last traded at3.328 percent, up 2 basis points from Wednesday's close. OnThursday, it fell to 3.278 percent, an 11-1/2-month low.

So far in May, the 10-year yield has fallen 17 basis points,while the 30-year yield has declined 13 basis points, accordingto Reuters data.

On the data front, upper U.S. Midwest business activityaccelerated in May, hitting its strongest level since October,the Institute for Supply Management-Chicago said on Friday.

"It's not a sustained trend yet, but things are improving,"Milstein said.

Other news on the U.S. economy was mixed. Thomson Reuters (Frankfurt: TOC.F - news) and the University of Michigan's final May reading on U.S.consumer sentiment was a bit below forecast.

Earlier, the government said personal spending unexpectedlydipped 0.1 percent in April following a revised 1 percent jumpin March, raising some concerns about consumer spending in thesecond quarter. It reported another 0.2 percent monthly gain inthe core index on personal consumption expenditure, the FederalReserve's preferred inflation gauge. (Reporting by Richard Leong; Editing by Paul Simao)

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