(Recasts, adds analyst comment, table, byline, updates prices in text)
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 16 (Reuters) - U.S. Treasury prices rose on Friday, as investors bought back bonds after a selloff earlier in the week spurred by robust U.S. inflation data that raised the possibility the Federal Reserve may hike interest rates at a faster pace than expected.
U.S. benchmark 10-year yields, which move inversely to prices, had jumped to four-year highs this week, while 2-year notes touched more than nine-year peaks.
Yields briefly ticked higher after data showed stronger-than-expected housing starts and import prices, suggesting inflation was on the rise and the economy on a stable growth path. But there was not enough support for the price move.
"The bond market was oversold from Wednesday's CPI-related selling and that may be nearing an end soon," said Tom di Galoma, managing director at Seaport Global in New York.
Wednesday's data showed that the core consumer price index grew 0.3 percent, the biggest increase since January 2017, compared with 0.2 percent in December. That was followed by stronger-than-expected U.S. producer prices data. Both reports led to a spike in yields.
Treasury yields on Friday were also tracking a decline in government bonds overseas, analysts said. German and UK bonds were down on Friday, including Japanese government bonds.
Analysts attributed the drop in JGBS to news that Bank of Japan Governor Haruhito Kuroda had been re-appointed for another term. Masazumi Wakatabe, an advocate of aggressive easing, was appointed BoJ deputy governor. Their appointments suggest there could a few more years of monetary stimulus, analysts said.
In morning trading, U.S. benchmark 10-year Treasury note yields fell to 2.8622 percent , from Thursday's 2.893 percent.
"The 10-year found interest at 2.90 percent," said Lou Brien, market strategist at DRW Trading in Chicago.
U.S. 30-year yields dropped to 3.1152 percent , from 3.145 percent late on Thursday.
Yields initially rose after data showed U.S. housing starts jumped 9.7 percent to a seasonally adjusted annual rate of 1.326 million units, the highest level since October 2016. That followed an upwardly revised sales pace of 1.209 million units. But the rise in yields was shortlived.
Meanwhile U.S. import prices climbed more than expected, rising 1.0 percent in January, boosting the outlook for inflation in the coming months. February 16 Friday 10:10AM New York / 1510 GMT
PriceUS T BONDS MAR8 144-19/320-19/32 10YR TNotes MAR8 120-168/2560-52/256
PriceCurrent Net
Yield % Change
(bps)Three-month bills 1.57 1.59780.000Six-month bills 1.79 1.831 0.010Two-year note 99-162/256 2.19360.010Three-year note 99-154/256 2.389 -0.010Five-year note 98-220/256 2.6223-0.015Seven-year note 98-36/2562.7963-0.02510-year note 99 2.8658-0.02730-year bond 97-196/256 3.1152-0.030
DOLLAR SWAP SPREADS
Last (bps) Net
Change
(bps) U.S. 2-year dollar swap27.00-1.25spread U.S. 3-year dollar swap20.75 0.50spread U.S. 5-year dollar swap 9.75 0.00spread U.S. 10-year dollar swap1.50 0.50spread U.S. 30-year dollar swap-16.00 0.50spread (Editing by Bernadette Baum)
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