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Sanctions on Russian oil firms raise global oil prices by

5%

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US CPI report to be released on Friday despite government

shutdown

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US to hold $26 billion, five-year TIPS auction later on

Thursday

By Chuck Mikolajczak

NEW YORK, Oct 23 (Reuters) - U.S. Treasury yields rose

on Thursday after President Donald Trump slapped Russia's two

biggest oil companies with sanctions, while investors braced for

an upcoming reading on inflation.

The sanctions targeting Rosneft and Lukoil sparked a jump in

global oil prices of about 5% and marked a policy shift by Trump

as he tries to end the war in Ukraine, while India weighed

cutting Russian imports.

The yield on the benchmark U.S. 10-year Treasury note

rose 3.3 basis points to 3.986% after hitting a

session high of 3.997%.

"The oil thing just made things a little bit worse overnight,

with not only the U.S., but the EU, basically sanctioning oil,

and then the rise in oil just didn't fare well for bond yields,"

said Tom di Galoma, managing director at Mischler Financial

Group in Stamford, Connecticut.

"Right now, with the lack of data, the market can really

only focus on what's being said about oil or what's being said

about possible tariffs on China, or some kind of new tariff on

Russia, that's kind of what we're trading - headlines."

MARKETS FOCUSING ON RELEASE OF INFLATION DATA

The yield on the 30-year bond rose 3 basis

points to 4.569%.

Markets have been dealing with a dearth of economic data due to

the U.S. government shutdown, now in its 23rd day and the

second-longest in history.

However, the U.S. Bureau of Labor Statistics said last week it

would publish the consumer inflation report for September on

Friday to assist the Social Security Administration with its

annual cost-of-living adjustment for 2026 for millions of

retirees and other benefits recipients, which could influence

market expectations for the path of Federal Reserve interest

rate cuts.

A closely watched part of the U.S. Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, seen as an indicator of economic

expectations, was at a positive 51.7 basis points.

The two-year U.S. Treasury yield, which

typically moves in step with expectations for the Fed's policy

rate, rose 2.3 basis points to 3.467%.

Markets almost have fully priced in a rate cut of at least 25

basis points at the U.S. central bank's policy meeting next

week, according to CME Group's FedWatch Tool, with expectations

for a cut currently at 98.9%.

The breakeven rate on five-year U.S. Treasury

Inflation-Protected Securities (TIPS) was last at

2.365% after closing at 2.345% on Wednesday, its highest level

in a week.

The Treasury will auction $26 billion in five-year TIPS

later on Thursday.

The 10-year TIPS breakeven rate was last at

2.303%, indicating the market sees inflation averaging about

2.3% a year for the next decade.