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TREASURIES-Hanging on Trump's words, U.S. Treasury yields rise on trade outlook

By Ross Kerber

By Ross Kerber BOSTON, Dec 4 (Reuters) - U.S. Treasury yields rose on Wednesday on a more positive outlook for a trade deal with China and showing the market zeroed in on slight changes in comments from U.S. President Donald Trump. The benchmark 10-year yield was up 5.8 basis points to 1.768% in morning trade, part of a broader enthusiasm for risk globally. Trump said on Wednesday that talks with China were going "very well," speaking at a meeting of NATO leaders near London. His remarks were taken as a contrast with comments he made on Tuesday, which raised the prospect of a long extension of trade tensions between the world's two biggest economies. In response, U.S. yields had fallen and at one point the 10-year was at its lowest since May of 2018. Wednesday's turnaround showed investors treating Trump's remarks with the same sensitivity they apply to the words of U.S. Federal Reserve officials speaking about interest rates, said Tony Bedikian, head of global markets for Citizens Bank. "It's similar to Fedspeak," he said. At the same time he said investors are probably overly focused on the presidential remarks since 10-year yields have traded in the range of 1.5% to 2% since October. "Right now we are mired in this range, and we need some more definitive results coming out of the trade talks" before 10-year yields would again exceed 2%, he said. The increases also showed traders shrugging off some economic news. U.S. private-sector job growth unexpectedly slowed to its weakest pace in six months in November, and goods producers and construction firms cut jobs, a private survey said on Wednesday. The two-year yield, typically seen as indicator of interest rate expectations, rose 3.8 basis points to 1.570% in morning trading. The spread between the two- and 10-year yields widened 1.75 basis points. The movement suggested investors overall expect the U.S. central bank to hold interest rates unchanged "for the foreseeable future," Bedikian said. Also on Wednesday the Bank of Canada held its overnight rate at 1.75% as expected and cited early signs the global economy was stabilizing. December 4 Wednesday 10:17AM New York / 1517 GMT Price Current Net Yield % Change (bps) Three-month bills 1.5475 1.5795 0.000 Six-month bills 1.5375 1.5754 -0.006 Two-year note 99-222/256 1.5681 0.036 Three-year note 100-38/256 1.5731 0.043 Five-year note 99-154/256 1.5834 0.049 Seven-year note 99-140/256 1.694 0.050 10-year note 99-220/256 1.7654 0.056 30-year bond 103-84/256 2.2222 0.062 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 1.25 0.00 spread U.S. 3-year dollar swap -2.75 0.50 spread U.S. 5-year dollar swap -3.00 0.25 spread U.S. 10-year dollar swap -7.75 0.25 spread U.S. 30-year dollar swap -34.00 0.25 spread (Reporting by Ross Kerber, Editing by Andrea Ricci)