TREASURIES-Yields jump after Fed's Powell offers more inflation tolerance

    By Ross Kerber
    Aug 27 (Reuters) - Longer-term U.S. Treasury yields moved to
their highest levels in months on Thursday and steepened the
yield curve after Federal Reserve Chairman Jerome Powell
outlined an aggressive new strategy to reach the bank's 2%
inflation target.
    The benchmark 10-year yield was up 4.6 basis
points in morning trading at 0.7325% - its highest since June 23
- after Powell said the U.S. central bank would allow periods of
inflation above the 2% level before hiking interest
rates. 
    The yield on the 30-year bond was up 7.2 basis
points at 1.4779%.
    Powell "has basically said it's an inflation target in name
only, and that brought in sellers," said Tom di Galoma, managing
director of Seaport Global Holdings.
    "Institutions think the Fed is going to keep rates lower for
longer and the Fed Funds rate is not going to move at all," he
said.
    Powell spoke as the Kansas City Fed began its annual
economic symposium, an event that is usually held in the
mountain resort of Jackson Hole, Wyoming, but is being conducted
virtually this year because of the pandemic.
    Powell described the results of the Fed's framework review,
an initiative started nearly two years ago through public
hearings and research to explore how monetary policy should be
adapted for a low interest rate environment.
    The number of Americans filing new claims for unemployment
benefits hovered around 1 million last week, suggesting the
labor market recovery was stalling as the COVID-19 pandemic
drags on and financial aid from the government dries
up.
    Wall Street's main indexes also rose on Thursday after
Powell's remarks.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between the yields on two- and 10-year
Treasury notes, seen as an indicator of economic
expectations, was at 57 basis points, about 3 basis points
higher than Wednesday's close and its highest since June 16.
    The two-year  U.S. Treasury yield, which
typically moves in step with interest rate expectations, was up
about a basis point at 0.1622% in morning trading.
    
  August 27 Thursday 10:51AM New York / 1451 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0975       0.0989    0.000
 Six-month bills               0.11         0.1119    0.000
 Two-year note                 99-237/256   0.1622    0.008
 Three-year note               99-206/256   0.1911    0.011
 Five-year note                99-184/256   0.3067    0.017
 Seven-year note               99-8/256     0.5176    0.033
 10-year note                  98-248/256   0.7325    0.046
 20-year bond                  97-144/256   1.2636    0.071
 30-year bond                  97-132/256   1.4779    0.072
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50         0.75    
 spread                                               
 U.S. 3-year dollar swap         7.25         0.75    
 spread                                               
 U.S. 5-year dollar swap         5.50         0.50    
 spread                                               
 U.S. 10-year dollar swap       -0.75        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -37.75        -1.75    
 spread                                               
                                                      
 
 (Reporting by Ross Kerber in Boston)
  

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