TREASURIES-US Treasuries gain on safe-haven demand as Israel strikes Iran

By Kevin Buckland

TOKYO, June 13 (Reuters) - U.S. Treasuries climbed on Friday, pushing 10-year yields to one-month lows, as investors flocked to safe-haven assets after Israel conducted military strikes on Iran.

Israel said early on Friday it had struck Iranian nuclear targets to block Tehran from developing atomic weapons, and Iranian media and witnesses reported explosions including at the country's main uranium enrichment facility.

The strikes likely killed members of Iran's general staff, including the chief of staff and several senior nuclear scientists, an Israeli defence official said.

The 10-year Treasury yield US10YT=RR dipped as much as 4.7 basis points (bps) to 4.31%, the lowest since May 8, before edging back to 4.3454%, as of 0129 GMT.

Tensions had been building as U.S. President Donald Trump's efforts to reach a nuclear deal with Iran appeared to be deadlocked. U.S. and Iranian officials were scheduled to hold a sixth round of talks on Tehran's escalating uranium enrichment programme in Oman on Sunday, according to officials from both countries and their Omani mediators.

"I thought Israel might give Iran the benefit of the doubt ahead of weekend talks with the U.S., but they've obviously decided to go it alone," said Tony Sycamore, an analyst at IG.

"While we await further news and a potential response from Iran, we are likely to see a further deterioration in risk sentiment as traders cut risk seeking positions ahead of the weekend."

For Treasuries investors though, the news pulls in both directions because of "the potential uplift to inflation that a spike in crude oil may cause", Sycamore said, which may explain the paring of initial bond gains.

Treasuries have been volatile since early April, when Trump announced a slew of widespread tariffs and presented a tax and spending bill now under debate in Congress - measures that could worsen the U.S. fiscal outlook.

Demand for longer-term bonds has weakened compared with shorter-dated debt in recent months. The 10-year yield reached a three-month high of 4.629% on May 22 but has been declining since.