TREASURIES-Benchmark U.S. yield falls below 1.5% for first time since May

 (Adds analyst comment, market activity, data release details)
    By Ross Kerber
    June 9 (Reuters) - U.S. Treasury yields fell on Wednesday
for a second day as traders positioned for a large auction and
inflation data due on Thursday, pushing the benchmark 10-year
 yield below 1.5% for the first time since May 7.
    The yield on the 10-year note was last down 5.4 basis points
at 1.4739% in morning trading.
    The move also pulled down a closely watched part of the U.S.
Treasury yield curve measuring the gap between yields on two-
and 10-year notes, seen as an indicator of economic
expectations. It was at 133 basis points, about five basis
points lower than Tuesday's close.
    Raymond James market strategist Ellis Phifer said investors
seemed to be taking sanguine stances before the next release of
consumer price index data by the U.S. Bureau of Labor Statistics
due on Thursday. Strong CPI data a month ago helped push the
yield on the 10-year to 1.707% in mid-May, but investors don't
seem so concerned about inflation now.
    "Inflation is higher but it doesn’t seem to be accelerating
at a pace that’s making the bond market nervous," Phifer said.
    A breakdown in talks in Washington on infrastructure
spending between U.S. President Joe Biden and a Republican
senator could also have contributed to the fall in yields,
Phifer said, since no deal or a later deal would mean less
future Treasury issuance.
    Booming demand as the U.S. economy reopens may continue to
push up inflation, but many economists expect the price surges
could be temporary.
    Investors will watch the results of a $38 billion auction of
10-year notes due at midday.
    Helping drive the move lower in yields overnight was a big
buyer of ultra-long Treasury futures around 4 a.m. ET, said
Andrew Brenner, head of international fixed income at
NatAlliance Securities. The 10-year yield dipped from 1.52% to
around 1.50% on the purchase, said Brenner.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down less
than a basis point at 0.1468%.
    The 10-year TIPS yield was at -0.87% and the
breakeven inflation rate was at 2.349% after touching its lowest
since late April.
     June 9 Wednesday 9:40AM New York / 1340 GMT
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             0.025        0.0253    0.000
 Six-month bills               0.04         0.0406    0.003
 Two-year note                 99-245/256   0.1468    -0.006
 Three-year note               99-216/256   0.3023    -0.024
 Five-year note                100-26/256   0.7292    -0.037
 Seven-year note               100-172/256  1.1494    -0.052
 10-year note                  101-100/256  1.4739    -0.054
 20-year bond                  102-204/256  2.0778    -0.053
 30-year bond                  104-224/256  2.1532    -0.056
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         6.50        -0.25    
 U.S. 3-year dollar swap         8.25        -2.50    
 U.S. 5-year dollar swap         6.75        -0.25    
 U.S. 10-year dollar swap       -3.00         0.25    
 U.S. 30-year dollar swap      -29.25         0.00    
 spread (Reporting by Ross Kerber in Boston. Additional reporting by
Kate Duguid in New York;
Editing by Bernadette Baum and Emelia Sithole-Matarise)