(Adds comment, yield curve, 30-year bond auction results,

updates yields)

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Fed policymakers divided on rate cuts amid inflation

concerns

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US government reopens after record 43-day shutdown

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US 30-year bond auction shows weak results

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US Treasury 2/10 yield curve in bear-steepening mode

By Gertrude Chavez-Dreyfuss

NEW YORK, Nov 13 (Reuters) - U.S. Treasuries slid on

Thursday as investors scaled back expectations of an imminent

Federal Reserve interest rate cut amid lingering uncertainty

over inflation and stark divisions among central bank

policymakers on the outlook for the economy and monetary policy.

The U.S. government reopened after a record 43-day shutdown,

easing some of the uncertainty that had weighed on market

sentiment. The bill agreed to in Congress and signed by

President Donald Trump removes a key source of disruption,

though the bond market remained focused on broader fiscal and

monetary challenges ahead.

A soft U.S. 30-year bond auction also added to the overall

market selloff, although it was not a surprise for some

investors because previous sales of the debt have been

underwhelming for most of this year.

In afternoon trading, the benchmark 10-year Treasury yield was

up 3.6 basis points at 4.115%, while U.S. 30-year

bond yields rose 4.4 bps to 4.706%.

On the shorter end of the curve, the two-year yield, which

reflects interest rate expectations, advanced 2.7 bps to 3.593%

.

Bond prices move inversely to yields.

U.S. rate futures priced in on Thursday just a 50% chance of

another Fed rate cut next month, from about 62% late on

Wednesday, according to LSEG calculations, with about 80 bps of

cuts expected by the end of 2026.

"The Fed is clearly divided ... and the speakers made it

clear that there isn't a lot of data that you can latch on to.

"It's obviously right to be concerned about inflation because

it's sticky at 3%," said Bob Savage, head of markets macro

strategy at BNY in New York.

"We won't get a CPI (Consumer Price Index) report for

October, but we will get it for November. If you discount food

inflation, which is clearly there, or energy deflation, what you

really want to focus on is our services (inflation), which is

sticky, and how much have all the headlines about job losses

really translated into wages going up or down."

In the absence of data, bond investors have focused on

comments from Fed officials.

A growing number of Fed policymakers in recent days have

signaled hesitation on further easing, helping push financial

market-based odds of a reduction in borrowing costs in December

to near even. Fed officials who spoke recently cited worries

about inflation and signs of relative stability in the labor

market after two U.S. rate cuts this year.

PERSISTENT INFLATION, SOFT AUCTION

"Inflation has been persistent and we had some interesting

comments from (Treasury Secretary Scott) Bessent backing off on

some food tariffs. I think that's, quite frankly, an

acknowledgement that they have been wrong on tariffs," said

George Cipolloni, portfolio manager at Penn Mutual Asset

Management in Philadelphia.

Bessent on Wednesday said Americans would see "substantial

announcements" in the coming days aimed at lowering the prices

of products such as coffee, bananas and other items not grown in

the U.S.

"We are definitely seeing weakness in the labor market:

that's clear, but we're just not getting enough relief on the

inflation side. So the Fed is kind of stuck. I would be

surprised if they didn't cut at least one more time by 25 basis

points," Cipolloni added.

The U.S. Treasury on Thursday sold $25 billion in 30-year

bonds in an auction that drew weak demand. The bonds priced at

4.694%, above market expectations at the bid deadline,

indicating investors demanded a premium to take them down.

The bid-to-cover ratio, another gauge of demand, was 2.29, less

than the 2.38 for the $22 billion reopened bonds last month but

higher than the 2.27% for the new issue in August.

Data also showed that primary dealers absorbed 14.5% of the

auction supply - almost double the previous 8.7% and slightly

above the 13.1% average - suggesting they had to step in to

support demand.

Dealers generally avoid holding large volumes of Treasuries

because doing so inflates their balance sheets, increases

leverage requirements, and forces them to allocate more capital.

In other parts of the bond market, the yield curve

steepened, as the spread between U.S. two-year and 10-year

yields rose to 52 bps, from 49.7 bps late

Wednesday.

The curve was in a bear-steepening mode, with long-term

yields rising faster than short-term rates. It reflected

investor views that inflation has picked up, at which point the

market is pricing in that the Fed could pause its easing cycle.