US yields head lower after Treasury offers liquidity support

WASHINGTON, Aug 19 (Reuters) - Yields on ‌the benchmark 10-year ​U.S. Treasury ​as well as 30-year bonds were lower on Wednesday morning following an announcement that the Treasury Department would double the size of liquidity support buyback operations ‌for longer-dated bonds.

The easing pressure on U.S. borrowing costs came as longer-dated ⁠euro zone bonds also retreated from multi-year highs hit during a global selloff on fears for governments' deteriorating fiscal ‌situations, supply shocks and inflation fears.

At ‌the same time, progress toward ending the U.S.-Iran conflict remained stalled on Wednesday and crude prices continued to nudge upwards. Markets will later scrutinize the U.S. central bank's expected publication ​of minutes from its most recent policy meeting and an auction of 20-year bonds.

Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, said markets were welcoming the signal ⁠that Washington will act if necessary, but he said the Treasury could choose to do more.

"I don't want to call ​it a Band-Aid measure but it is the first of many possible actions that the Treasury could take to support the long end," he ​said. "A more permanent measure would be lowering long-end auction ‌sizes."

In the Fed minutes due to be released Wednesday, investors will be looking for signs that some members of the policy-setting Federal Open ⁠Market Committee are open to a rate hike despite Fed Chairman Kevin Warsh's decision not to offer forward guidance, said Goldberg.

"Any sort of guidance would be very well appreciated," he said.

The yield on the ⁠benchmark U.S. 10-year Treasury note was last down 4.9 basis points to 4.655%. The yield on the 30-year ​bond fell 8 basis points to 5.205%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was ‌at a positive 47.4 basis points.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, rose ‌0.6 basis points to 4.181%.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.287% ⁠after closing at 2.288% on August ‌18.

The 10-year TIPS breakeven rate ​was last at 2.307%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Douglas Gillison in Washington; editing by ‌Philippa Fletcher)

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