TREASURIES -U.S. yields retreat from decade highs as stocks swoon

* Worries about Chinese growth spur equities sell-off Risk appetite fades as Fed hints at more U.S. rate hikes

* U.S. producer prices grow fastest in 6 years in Oct

* U.S. bond market to close Monday for Veterans Day

(Updates market action, adds quote) NEW YORK, Nov 9 (Reuters) – U.S. Treasury yields fell on Friday with shorter-dated yields retreating from the highest levels in a decade, as investors scooped up safe-haven U.S. government debt due to losses in equities worldwide on worries about economic growth in China and U.S. interest rate hikes. The yield decline was limited after data showed U.S. producer prices in October accelerated at the quickest rate in six years, supporting the view U.S. inflation would hold near the Federal Reserve’s goal of 2 percent. Trading volume was light ahead of Monday’s Veterans Day holiday when the U.S. bond market will be closed. Treasury yields were poised to end the week mixed, with traders attributing large swings to uncertainty about the outcome of the U.S. congressional elections; the $83 billion quarterly refunding; and Fed signals on interest rates. “The market after a week filled with major events feels fatigued,” said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York. Benchmark 10-year Treasury yields was down 4 basis points at 3.191 percent, on track to end the week modestly lower. The two-year yield was down nearly 4 basis points at 2.932 percent a day after touching a 10-1/2-year peak of 2.977 percent. It was poised to rise 2 basis points on the week. The five-year yield scaled down to 3.046 percent, headed for a weekly increase of less than 1 basis point after hitting a 10-year high of 3.098 percent on Thursday. The U.S. central bank, after a two-day policy meeting, signaled the economic expansion remains on track, which would allow for further rate increases. Interest rates futures implied traders placed about a 76 percent chance the Fed would raise key lending rates by a quarter point to 2.25-2.50 percent at its Dec. 18-19 meeting, according to CME Group’s FedWatch program. “The market is pretty convinced the Fed would raise rates in December,” said Larry Hatheway, chief economist at GAM Investments in Zurich. Treasuries yields briefly turned flat early Friday, as stronger-than-forecast U.S. producer prices renewed some concerns about rising inflation. The tit-for-tat tariffs between China and the United States, the world’s two biggest economies, seem to be taking a toll on Chinese producers. China’s producer inflation fell for a fourth straight month in October. Worries about slowing growth in China touched off selling of shares on major global equities markets. On Wall Street, the S&P 500 was down 1.4 percent.

Friday, Nov. 9 at 1456 EST (1956 GMT): Price

US T BONDS DEC8 137-27/32 21/32 10YR TNotes DEC8 118-28/256 11/32 Price Current Net Yield Change (pct) (bps) Three-month bills 2.31 2.3551 -0.003 Six-month bills 2.4525 2.5169 -0.003 Two-year note 99-228/256 2.9324 -0.037 Three-year note 99-164/256 3.0012 -0.044 Five-year note 99-56/256 3.0456 -0.044 Seven-year note 99-60/256 3.1231 -0.043 10-year note 99-112/256 3.1911 -0.041 30-year bond 99-164/256 3.3942 -0.031 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 25.70 -1.10 30-year vs 5-year yield 34.70 0.65

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 19.00 1.00

spread

U.S. 3-year dollar swap 16.25 1.50

spread

U.S. 5-year dollar swap 13.00 1.00

spread

U.S. 10-year dollar swap 5.75 0.50

spread

U.S. 30-year dollar swap -9.75 0.25

spread

(Reporting by Richard Leong; Editing by David Gregorio and Richard Chang)

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