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Fears of inflation send yields higher as tariffs

implemented

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Producer prices unexpectedly unchanged in February

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Treasury to sell $22 bln in 30-year bonds

By Karen Brettell

March 13 (Reuters) - U.S. Treasury yields rose on

Thursday on concerns about the potential for higher inflation as

a war over tariffs between the United States and trading

partners escalates.

The move comes despite data showing U.S. producer prices

were unexpectedly unchanged in February, which although likely

welcome news for the Federal Reserve is seen as backward looking

as it covers the period before tariffs were put in place.

"There's a tremendous amount of uncertainty due to all these

tariffs," said Tom di Galoma, managing director at Mischler

Financial Group.

U.S. President Donald Trump said on Thursday that he would

put a 200% wine tariff on all wines and other alcoholic products

coming out of the European Union if the bloc did not remove its

tariff on whiskey.

Trump's 25% duties on all U.S. steel and aluminum imports

took effect on Wednesday and he threatened further tariffs on EU

goods, as major U.S. trading partners said they would retaliate

for trade barriers already erected by the U.S. president.

Other data on Thursday showed that the number of Americans

filing new applications for unemployment benefits fell last

week, though traders remain on alert for a sharp increase as the

federal government implements large layoffs.

The yield curve has also steepened month in line with moves

in European government debt, di Galoma said.

Yields on German bunds have jumped on plans by German

politicians to massively increase fiscal spending.

The yield on benchmark U.S. 10-year notes was

last up 2.1 basis points on the day at 4.337%. The 2-year note

yield rose 0.2 basis points to 3.997%.

The yield curve between two-year and 10-year notes

steepened by around two basis points to 34 basis

points.

The Treasury will sell $22 billion in 30-year bonds on

Thursday, the final sale of $119 billion in coupon-bearing debt

this week.

The U.S. government saw fair demand for a $39 billion sale

of 10-year notes on Wednesday and a $58 billion auction of

three-year notes on Tuesday.