* U.S. 10-year rises from four-month low * U.S. 2/10-year yield curve hits deepest inversion since 2000 * U.S. 3-month/10-year briefly inverts, last steeper on the day (Adds new comment, bylines, datelines, table, bullets, updates prices) By Gertrude Chavez-Dreyfuss, Dhara Ranasinghe and Tom Westbrook NEW YORK/LONDON/SINGAPORE, Aug 2 (Reuters) – U.S. Treasury yields rose on Tuesday in volatile trading, as investors focused more on growth and attractive returns in the world's largest bond market, and worried less about global tension arising from U.S. House of Representatives Speaker Nancy Pelosi's reported visit to Taiwan. The U.S. benchmark 10-year yield rallied from a four-month low of 2.516% to last trade 4 basis points higher at 2.650% . "The bottom line is that growth prospects in Europe are really terrible, compared to the U.S., given the energy crisis," said Jay Hatfield, chief investment officer at Infrastructure Capital Management in New York. "U.S. rates are also dramatically higher than almost all European rates." The focus on Pelosi's Taiwan trip, while important because of the geopolitical implications, eased a bit, as investors surmised that a diplomatic resolution will somehow be worked out. Pelosi is expected to arrive in Taipei later in the day, people briefed on the matter said, as several Chinese warplanes flew close to the median line dividing the Taiwan Strait, a source told Reuters. "There was certainly a flight to safety earlier, but it's not a big deal any more in the U.S. session. The 10-year yield had a huge overnight move," Infrastructure's Hatfield said. "China has threatened to shoot her plane down, but it's very unlikely. Even if there's one in a million chance that it happens, people are still nervous. I think this will be a tail event that will happen, but will go away," he added. China has repeatedly warned against Pelosi going to Taiwan, which it claims as its own, while the United States said on Monday that it would not be intimidated by Chinese "sabre rattling". Longer-dated Treasuries were already well bid since weakening U.S. economic data has markets expecting a slowdown in both U.S. growth and the pace of interest rate hikes. The 10-year yield's fall briefly pushed the gap over three-month Treasury yields to -1.6 basis points US3MUS10Y=TWEB>. That curve was last steeper on the day at 10 bps. This is the latest part of the U.S. yield curve to move into inverted territory, in a further sign that U.S. recession risks are mounting. On the shorter-end of the curve, U.S. two-year yields were up 6.2 bps at 2.9714%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes deepened its inversion to -35.50 basis points, the most inverted since 2000. An inversion of this yield curve typically foreshadows recession. August 2 Tuesday 10:40AM New York / 1440 GMT Price Current Net Yield % Change (bps) Three-month bills 2.455 2.5048 -0.041 Six-month bills 2.87 2.9527 0.003 Two-year note 100-9/256 2.9816 0.073 Three-year note 100-68/256 2.905 0.080 Five-year note 100-24/256 2.7297 0.062 Seven-year note 99-124/256 2.7064 0.047 10-year note 101-252/256 2.6432 0.038 20-year bond 101-168/256 3.1368 0.019 30-year bond 98-192/256 2.9381 0.013 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 26.00 0.25 spread U.S. 3-year dollar swap 11.00 0.75 spread U.S. 5-year dollar swap 3.50 0.25 spread U.S. 10-year dollar swap 6.50 0.75 spread U.S. 30-year dollar swap -28.25 1.25 spread (Reporting by Tom Westbrook in Singapore and Dhara Ranasinghe in London; Editing by Christina Fincher and David Holmes )
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The Inflation Reduction Act, which awaits a House vote, has few if any of the taxes on individuals that Democrats originally called for.
The University of Michigan's preliminary August reading on the overall index on consumer sentiment came in at 55.1, up from 51.5 in the prior month. "All components of the expectations index improved this month, particularly among low- and middle-income consumers for whom inflation is particularly salient," survey director Joanne Hsu said in a statement. Indeed, the survey's one-year inflation expectation fell to a six-month low of 5.0% from 5.2%, while its five-year inflation outlook edged up to 3.0% from 2.9%, holding within a range that has prevailed for the past year.
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Canada's inverted yield curve is signaling the Bank of Canada may raise interest rates to a level that triggers a recession, placing the central bank in a tough spot as it aims to tame high inflation and engineer a "soft landing" for the economy. Canada's economy is likely to be particularly sensitive to higher interest rates after Canadians borrowed heavily during the COVID-19 pandemic to participate in a red-hot housing market. "It makes sense that we should see more of an inversion this cycle than we have in the last few just because there is so much more of a central bank overtightening component to this," said Andrew Kelvin, chief Canada strategist at TD Securities.
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Ten- and 30-year Treasury yields soared on Thursday after the latest signs of easing U.S. inflation buttressed a more optimistic outlook on the U.S. economy. The yield on the 2-year Treasury (BX:TMUBMUSD02Y) rose 1.3 basis points to 3.227% from 3.214% as of Wednesday afternoon. The yield on the 30-year Treasury (BX:TMUBMUSD30Y) rose 13.2 basis points to 3.173% from Wednesday’s level of 3.041%.
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With $3 billion in new funding available, officials toured an endangered sewer line next to a creek with eroded banks.

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