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TREASURIES-U.S. yields little changed as inflation remains key topic

    NEW YORK, May 18 (Reuters) - U.S. Treasury yields remained
little changed on Tuesday as strong consumer demand as seen in
Walmart and Home Depot results was insufficient to push market
participants into the camp that disavows the Federal Reserve's
views on inflation.
    The yield on 10-year Treasury notes was up 0.5
basis point to 1.654% as the longer-dated government debt edged
slightly higher but the short end remained mostly unchanged.
    On the margin there are concerns about inflation, said Guy
LeBas, chief fixed income strategist at Janney Montgomery Scott.
The break-even rates fall very much in line with the Fed's
transitory phrasing on inflation, he said.
    "Forward breakevens are lower than spot breakevens,
suggesting the market thinks inflation is going to rise then
fall," he said.
    Market participants were waiting for the release on
Wednesday of the minutes from the Federal Open Market
Committee's meeting in April, but nothing material was expected,
LeBas said.
    "It's unlikely that we're going to get material changes out
of the FOMC minutes," he said. 
    Walmart Inc raised its full-year earnings forecast
after shoppers armed with government stimulus checks ventured
back into stores and Home Depot Inc reported a
bigger-than-expected 31% jump in quarterly same-store sales. 

    While the strong results were driven by pent-up demand, the
longer-term impact on inflation from increased consumer spending
is still unknown. 
    U.S. homebuilding fell more than expected in April as a
Commerce Department report showed housing starts tumbled 9.5%.

    The Treasury was set later to auction $34 billion in 52-week
notes.
    The yield on the 30-year Treasury bond was up
1.3 basis points to 2.368%. 
    The break-even rate on five-year U.S. Treasury
Inflation-Protected Securities (TIPS) was last at
2.735%, after closing at 2.717% on Monday, near its highest
close in just over a decade.
    The 10-year TIPS break-even rate was last at
2.557%, indicating the market sees inflation averaging 2.5% a
year for the next decade.
    
May 18 Tuesday 10:57AM New York / 1457 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.015        0.0152    0.000
 Six-month bills               0.03         0.0304    -0.003
 Two-year note                 99-242/256   0.1531    0.000
 Three-year note               99-192/256   0.3341    0.000
 Five-year note                99-160/256   0.8275    -0.002
 Seven-year note               99-184/256   1.2924    0.002
 10-year note                  99-208/256   1.6454    0.005
 20-year bond                  93-136/256   2.2838    0.022
 30-year bond                  100-32/256   2.3691    0.014
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.75        -0.25    
 spread                                               
 U.S. 3-year dollar swap        11.00        -0.25    
 spread                                               
 U.S. 5-year dollar swap         8.00         0.25    
 spread                                               
 U.S. 10-year dollar swap       -4.00         0.50    
 spread                                               
 U.S. 30-year dollar swap      -32.00         0.25    
 spread (Reporting by Herbert Lash; editing by Jonathan Oatis)
  
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