TREASURIES- Inflation fears, poor bond auction push yields higher

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 (Recasts, updates yields, adds bond auction results)
    By Ross Kerber and Karen Pierog
    Nov 10 (Businesshala) - U.S. Treasury debt yields shot higher on
Wednesday as the market was battered by the biggest annual gain
in U.S. consumer prices in 31 years and a weak 30-year bond
auction.
    But "real" yields on Treasury Inflation-Protected Securities
(TIPS) fell to record lows after the latest consumer price data
reinforced inflation concerns and flattened a closely watched
part of the yield curve.
    The yield on 10-year TIPS dipped as low as
-1.243% and the yield on 30-year TIPS went as low
as -0.608%, both records, in morning trading then drifted higher
later in the session.
    Inflation expectations soared, with the five-year breakeven
inflation rate reaching a record-high 3.113% and
the 10-year breakeven rate rising to 2.72%, the
highest since May 2006.
    The moves came after higher-than-expected consumer price
inflation, which could lead the Federal reserve to tighten
monetary policy. A report from the U.S. Labor Department showed
prices increased more than expected in October as the cost of
gasoline and food surged, leading to the biggest annual gain
since 1990.
    "The market has to do a one-time adjustment on inflation
expectations and that's why you get a day like today," said Gary
Pzegeo, head of fixed income for CIBC Private Wealth.
    Meanwhile, the U.S. Treasury's $25 billion auction of
30-year bonds had a poor showing, according to analysts, pushing
yields on the long end of the curve to session highs. The bonds
were sold with a high yield of 1.940% and below-average demand
at a bid-to-cover ratio of 2.20.
    The benchmark 10-year yield, which jumped as
high as 1.592%, was last up 10.4 basis points at 1.5528%. The
30-year yield, which hit 1.988% following the
auction, was last 9.7 basis points higher at 1.9177%. The
inversion on the longest end of the curve that began late last
month continued with the 20-year yield at 1.9636%.
    On the shorter end of the curve, the two-year yield
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