TREASURIES OUTLOOK-Yields edge higher as concerns about trade war persist

* Trade war fears boost demand for bonds

* Treasury sells $34 bln 2-year notes to solid demand

* Consumer confidence dips in June

By Karen Brettell

NEW YORK, June 26 (Reuters) - U.S. Treasury yields edged higher on Tuesday as concerns lingered that trade wars could harm economic growth, but safety buying was capped by expectations the Federal Reserve will continue to raise interest rates.

Trade war fears were stoked by reports that the Treasury was drafting curbs that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with "industrially significant technology."

U.S. Treasury Secretary Steven Mnuchin said on Monday that investment restrictions will not be specific to China. However, White House trade and manufacturing adviser Peter Navarro sought to downplay Mnuchin's remarks, telling CNBC television that any restrictions would just target China.

“There is still generally a focus on trade and a bit of uncertainty over what we are going to hear from the Trump administration this week regarding potential investment restrictions,” said Brian Daingerfield, macro strategist at RBS (LSE: RBS.L - news) Securities in Stamford, Connecticut.

U.S. President Donald Trump also said on Tuesday the government was completing a study about increasing import tariffs on cars from the European Union and suggested he would take action soon.

Demand for Treasuries has been offset by some hesitation to buy bonds, with the U.S. central bank expected to continue to raise interest rates.

“The Federal Reserve has yet to show any meaningful signs of slowing its pace of hikes in response to trade,” said Daingerfield.

Fed policymakers earlier this month said two additional rate hikes are expected by the end of this year, compared with one previously.

Data on Tuesday showed that U.S consumer confidence ebbed in June, which economists blamed on escalating tensions between the United States and its trade partners.

Benchmark 10-year notes fell 3/32 in price on the day to yield 2.884 percent, up from 2.875 percent late on Monday. The yield curve between two-year and 10-year notes was little changed on the day at 34 basis points, just above the low of 33 basis points on Monday, which was the flattest level since 2007.

The Treasury Department sold $34 billion in two-year notes to solid demand on Tuesday, the first sale of $100 billion in short- and intermediate-dated debt this week.

The notes sold at a high yield of 2.538 percent, just below where the yields had traded before the auction.

The Treasury will also sell $36 billion in five-year notes on Wednesday and $30 billion in seven-year notes on Thursday. (Editing by Lisa Shumaker)