UK Markets closed

TREASURIES-Prices gain after strong auction, before CPI data

(Adds auction results, quotes, North Korean fears, updates


* Solid demand for $12 bln sale of 30-year bonds

* Consumer price data on Friday in focus

* North Korea fears adds some safety buying

By Karen Brettell

NEW YORK, Oct (Shenzhen: 000069.SZ - news) 12 (Reuters) - U.S. Treasury prices gained on

Thursday after the Treasury Department's $12 billion bond sale

drew strong demand, and as investors repositioned ahead of

inflation data due on Friday.

The 30-year bonds sold at yields just below pre-auction

levels, and the bid-to-cover ratio was 2.53, the highest since

September 2015.

"It went well," said Justin Lederer, an interest rate

strategist at Cantor Fitzgerald in New York. "There was demand

out the curve, after the recent selloff rates have stabilized."

Demand was also solid for Treasury's $24 billion in

three-year notes and $20 billion in 10-year notes on Wednesday.

Bids were supported by news from the United States

Geological Survey (USGS) on Thursday about an event with

"earthquake like characteristics" in an area in North Korea

where there had previously been nuclear tests, but that the USGS

could not determine if it was natural or man-made.

Benchmark 10-year notes gained 5/32 in price to

yield 2.327 percent, down from 2.345 percent on Wednesday.

Traders shifted focus to consumer price data due on Friday

for further indications of whether inflation is picking up.

The Labor Department said on Thursday its producer price

index for final demand increased 0.4 percent in September. In

the 12 months through September, the PPI jumped 2.6 percent, the

biggest gain since February 2012.

"PPI was a little bit better, but that doesn't really

translate well to CPI," said Gennadiy Goldberg, an interest rate

strategist at TD Securities in New York. "I think for the most

part markets are still waiting for the CPI report tomorrow."

Ten-year yields jumped to 2.402 percent on Friday, the

highest level since May 11, after the government's employment

report for September showed a rise in wages that boosted

expectations for rising inflation.

Analysts, however, have said that data was muddied by recent

hurricanes. Adverse weather is seen as having impeded

lower-income workers from getting to work more than it did

higher-income workers.

Minutes from the Federal Reserve's September meeting

released on Wednesday showed that Fed policymakers had a

prolonged debate about the prospects of a pickup in inflation

and the path of future interest rate rises if it did not.

(Editing by Susan Thomas and Richard Chang)