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TREASURIES-Yields dip on COVID concerns, Fed on track to trim bond purchases

 (Adds quotes, data, auction results, updates prices)
    By Karen Brettell
    NEW YORK, Aug 19 (Reuters) - U.S. Treasury yields fell on
Thursday as risk appetite worsened on concerns about the spread
of COVID variants, and a day after the Federal Reserve said it
expects to begin paring bond purchases this year.
    A rise in cases of the Delta variant is adding to fears that
the economy will not recover as quickly as hoped and weighing on
consumer confidence.
    “I think for the most part what we are seeing now is a
reaction to concerns about the Delta variant (and) the after
effects of that sort of shocking consumer sentiment report that
we got this past Friday,” said Kevin Flanagan, head of fixed
income strategy at WisdomTree.
    Data on Friday showed that U.S. consumer sentiment dropped
in early August to its lowest level in a decade as Americans
gave faltering outlooks on everything from personal finances to
inflation and employment.
    “The sentiment numbers are lower than at any point during
2020 and appear to be weighing on policymakers as they ponder
the timing and composition of QE tapering as we head into the
fall,” David Petrosinelli, senior trader at InspereX said in a
report on Thursday.
    Minutes from the Fed’s July meeting released on Wednesday
showed that the bulk of the U.S. central bank's policy-setting
committee is coalescing around a plan that would see the Fed
start trimming its bond-buying program later this year, though
policymakers remained somewhat at odds over how fast to taper
the asset purchases.
    The Taliban’s takeover of Afghanistan this week also creates
new geopolitical uncertainties that could alter the Fed’s
thinking.
    “The geopolitical landscape just became more complicated.
Should the chaos in Afghanistan persist, the timing of tapering
could easily get pushed out past year-end,” Petrosinelli said.
    Benchmark 10-year yields dipped three basis
points to 1.245%. They fell to 1.127% earlier this month, which
was the lowest since February.
    Investors will be watching a speech by Fed Chair Jerome
Powell in Jackson Hole next week for any new indications on when
the taper will be announced.
    Data on Thursday showed that the number of Americans filing
new claims for unemployment benefits fell to a 17-month low last
week, pointing to another month of robust job growth, though
surging COVID-19 infections pose a risk to the labor market
recovery.
    A separate report from the Philadelphia Fed Growth showed
that growth in factory activity in the U.S. mid-Atlantic region
slowed for the fourth consecutive month in August after hitting
its highest pace in nearly half a century earlier this spring.

    The Treasury saw solid demand for an $8 billion sale of
30-year Treasury Inflation-Protected Securities (TIPS), which
sold at a high yield of minus 0.292%.
    
      August 19 Thursday 3:16PM New York / 1916 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0525       0.0532    -0.008
 Six-month bills               0.0475       0.0482    -0.003
 Two-year note                 99-207/256   0.2236    0.005
 Three-year note               99-208/256   0.4383    0.005
 Five-year note                99-74/256    0.7718    -0.006
 Seven-year note               99-192/256   1.0374    -0.017
 10-year note                  100-12/256   1.245     -0.028
 20-year bond                  99-52/256    1.7977    -0.038
 30-year bond                  102-200/256  1.8783    -0.035
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.25         0.00    
 spread                                               
 U.S. 3-year dollar swap        10.00        -0.25    
 spread                                               
 U.S. 5-year dollar swap         8.50         0.25    
 spread                                               
 U.S. 10-year dollar swap        1.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -27.75         0.75    
 spread (Editing by Barbara Lewis and Cynthia Osterman)
  
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