TREASURIES-U.S. yields drift higher as risk sentiment stays positive

       By Gertrude Chavez-Dreyfuss
    NEW YORK, July 29 (Reuters) - U.S. Treasury yields edged
higher in choppy trading on Thursday, although were below their
peaks for the day as strong earnings, positive Chinese news and
solid European economic reports balanced weaker-than-expected
U.S. data.
    The advance estimate for U.S. gross domestic product in the
second quarter showed that the economy grew at a 6.5% annualized
rate, lower than the market forecast for an 8.5% rise.

    "File this one under solid rather than stellar. Pre-release
hype had suggested that America's economy might be growing
nearly as quickly as it did during last autumn's gravity-defying
bounceback," said James Bentley, director of Financial Markets
Online.
    "But as the initial disappointment fades from the second
quarter's below expectation print, cooler heads are still seeing
many reasons to be cheerful....The second quarter's 6.5%
expansion rate is impressive by any yardstick and is even more
laudable when you remember that it was not turbocharged by
Federal stimulus in the way the first quarter's numbers were,"
he added.
    In a separate report, U.S. initial jobless claims were at
400,000 for the latest week, higher than consensus expectations
of 380,000.
    U.S. stocks, however, looked past softer-than-forecast U.S.
data, with the Dow and S&P 500 hitting fresh
intraday record highs early Thursday due in part to a slate of
strong corporate earnings reports.
    In midmorning trading, the U.S. 10-year Treasury yield was
up a little at 1.269% from 1.263% late on Wednesday.
    U.S. 30-year yields were little changed at 1.914%
 from Wednesday's 1.911%.
    Also on Thursday, the Treasury is selling $62 billion in
7-year notes.
    Ahead of the auction, U.S. 7-year note yields were flat at
1.024%, from Wednesday's 1.02%.
    Risk appetite on Thursday improved, with Chinese shares
higher, including a 10% bounce in tech giant Tencent - its
second biggest in nearly a decade - after reports that
regulators had called banks overnight to ease concerns about the
recent crackdown on sectors like tech and education, and on
overseas listings.
    Adding to a more positive global risk sentiment were strong
European economic reports. Data showed euro zone investor
sentiment reached a record high and state-level data hinted that
German inflation would exceed expectations, pushing European
yields higher

      July 29 Thursday 10:16AM New York/1416 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0475       0.0482    -0.003
 Six-month bills               0.0525       0.0532    0.002
 Two-year note                 99-214/256   0.2075    -0.003
 Three-year note               100          0.375     -0.011
 Five-year note                99-118/256   0.7351    -0.005
 Seven-year note               101-124/256  1.0271    0.007
 10-year note                  103-68/256   1.2693    0.006
 20-year bond                  106-216/256  1.836     0.005
 30-year bond                  110-104/256  1.915     0.004

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap         7.00        -0.50
 spread
 U.S. 3-year dollar swap        11.50         0.00
 spread
 U.S. 5-year dollar swap         8.75         0.75
 spread
 U.S. 10-year dollar swap        2.75         0.75
 spread
 U.S. 30-year dollar swap      -24.00         1.50
 spread


 (Reporting by Gertrude Chavez-Dreyfuss)

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