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

May 30, 2014

* 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. Treasuries yields rose on Friday as the investor demand that stoked May's bond rally faded further and Wall Street dealers sought to resell their share of this week's $95 billion in fixed-rate government debt supply.

The rise in Treasuries yields accelerated on a surprise increase in a private measure on U.S. Midwest business activities in March, supporting the view of a solid economic rebound in the second quarter after a contraction in the first quarter due partly to a harsh winter.

"You had a redistribution of supply yesterday and that seemed 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 New York.

Longer-dated yields were not too far above the 11-month lows they set earlier this week on some doubts about the U.S. economic recovery and bets that the European Central Bank might embark on an aggressive stimulus program next week that could end up lowering U.S. and euro zone yields.

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

The bank's index on Treasuries that mature in 20 years or longer has risen 3.18 percent month-to-date, which would be the best 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 basis points 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 at 3.328 percent, up 2 basis points from Wednesday's close. On Thursday, 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, according to Reuters data.


On the data front, upper U.S. Midwest business activity accelerated 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 unexpectedly dipped 0.1 percent in April following a revised 1 percent jump in March, raising some concerns about consumer spending in the second quarter. It reported another 0.2 percent monthly gain in the core index on personal consumption expenditure, the Federal Reserve's preferred inflation gauge. (Reporting by Richard Leong; Editing by Paul Simao)