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TREASURIES-U.S. yields mixed, lower on long end, as Fed meeting looms

       * U.S. 2/10 yield curve still inverted; recession risks rise
    * U.S 10-year yield falls after U.S. existing home sales
    * Fed still has a long way to go before pausing hikes -
analyst
    * U.S. 20-year shows solid results

 (Recasts, adds new comment, U.S. data, Treasuries table, bullet
headlines, 20-year auction, bylines)
    By Gertrude Chavez-Dreyfuss and Rodrigo Campos
    NEW YORK, July 20 (Reuters) - U.S. Treasury yields were
mixed on Wednesday, moving within narrow ranges, as bond
investors balanced their positions ahead of another Federal
Reserve meeting next week that could signal more hefty rate
increases to scupper persistently strong inflation.
    A fairly strong U.S. 20-year bond auction contributed to
gains on the long end, pushing their yields lower compared with
those with shorter-term maturities and keeping the curve
inverted.
    The inversion reflected concerns that aggressive Fed hikes
could tip the world's largest economy into recession.
    The yield of the U.S. two-year note exceeded that of the
benchmark 10-year debt by about 21.8 basis points
(bps) on Wednesday. The inversion was as deep as
34.4 bps on Monday, the largest inversion since 2000, Refinitiv
data showed.
    The 2/10 inversion specifically preceded the last eight
recessions, analysts said, as they looked cautiously to the
Fed's statement after the July 26-27 policy meeting.
    The Fed is widely expected to raise interest rates by
another 75 bps.
    "I don't think the Fed is going stop raising rates. If you
look at the inflation numbers, they are really high, but they
will come down," said Gregory Faranello, head of U.S. rates at
AmeriVet Securities in New York.
    "If the Fed is committed to a 2% core inflation target, we
have a really long way to go. And rates may need to go up much
more than what they have been priced for right now," he added.
    In afternoon trading, the benchmark U.S. 10-year yield rose
nearly 2 bps to 3.0377%. For now, analysts see the
10-year peaking around 3.5%. Since hitting an 11-year high of
3.4980% in mid-June, the 10-year yield has declined by 45 bps.
    The 10-year yield slipped after data showed U.S. existing
home sales fell for a fifth straight month in June to the lowest
level in two years.
    Sales of previously-owned homes fell 5.4% to a seasonally
adjusted annual rate of 5.12 million units last month, the
lowest level since June 2020 when sales were rebounding from the
COVID-19 lockdown slump.
    The U.S. 20-year yield slipped to 3.4301%, as
its price rose, helped a bit by a fairly decent auction.
    The 20-year's high yield stopped at 3.42%, lower than the
expected rate at the bid deadline, suggesting that investors
were willing to take the note at a lower rate. The bid-to-cover
ratio, a measure of demand, was 2.6, the highest since April.

    There was record demand from indirect bidders, which include
foreign central banks. A sell-off in the 20-year bond may have
helped shore up demand for the security, analysts said.
    "Bidding stats (for the auction) were quite strong in a
vacuum, but the 20-year point continues to struggle on an
outright basis," wrote Tom Simons, money market economist at
Jefferies after the auction.
    The U.S. two-year yield, which typically moves in step with
interest rate expectations, rose 1.7 bps to 3.248%.
    The yield on the 30-year Treasury bond was down
1.8 bps at  3.16%.

    July 20 Wednesday 4:10PM New York / 2010 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.4375       2.4867    -0.018
 Six-month bills               2.92         3.0049    -0.034
 Two-year note                 99-136/256   3.2502    0.019
 Three-year note               99-78/256    3.2463    0.014
 Five-year note                100-86/256   3.1757    0.026
 Seven-year note               100-156/256  3.1514    0.022
 10-year note                  98-172/256   3.0321    0.013
 20-year bond                  97-136/256   3.4224    -0.013
 30-year bond                  94-116/256   3.1636    -0.013

   DOLLAR SWAP SPREADS
                               Last (bps)   Net
                                            Change
                                            (bps)
 U.S. 2-year dollar swap        23.75        -0.50
 spread
 U.S. 3-year dollar swap         7.75         0.00
 spread
 U.S. 5-year dollar swap        -1.50         0.25
 spread
 U.S. 10-year dollar swap        6.75         0.50
 spread
 U.S. 30-year dollar swap      -26.00         1.50
 spread


 (Reporting by Rodrigo Campos and Gertrude Chavez-Dreyfuss;
Editing by Marguerita Choy and Jonathan Oatis)

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