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TREASURIES OUTLOOK-Yields fall as trade optimism fades

By Karen Brettell

* Optimism over a U.S.-China trade deal fades * Recent sell-off seen as overdone * Fed's Powell talks up U.S. economy By Karen Brettell NEW YORK, Nov 13 (Reuters) - U.S. Treasury yields fell on Wednesday as optimism that the United States and China will reach a deal to remove tariffs faded, and as the recent rise in yields was seen as overdone. U.S. President Donald Trump said on Tuesday that the two countries are close to a deal that would end the trade war but added that if a deal is not made the United States will raise tariffs on Chinese imports. “It seems overnight there were a lot more fears that the U.S. and China were further apart on the trade deal than initially suggested,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. The Wall Street Journal also reported on Wednesday that the trade talks have hit a snag over farm purchases. At the same time, the extent of the sell-off in the past two weeks, which has been based on optimism about a trade deal and better than expected U.S. data, is seen as exaggerated for the time being. Benchmark 10-year note yields rose to 1.973% on Thursday, which was the highest since August 1, and have climbed from 1.670% on November 1. On Wednesday, the yields fell to 1.872%, from 1.909% late Tuesday. Yields also dipped slightly on Wednesday after data showed that U.S. consumer prices gained in October, though core CPI gains were based on an uptick in healthcare costs. Shelter categories weakened, with the rent index rising 0.1%, the smallest gain since April 2011. “Food and energy are keeping inflation up, but underlying inflation isn’t doing so great,” Goldberg said. Retail sales data on Friday is the next major economic focus. Federal Reserve Chairman Jerome Powell said on Wednesday that U.S. central bankers see a "sustained expansion" ahead for the country's economy, with the full impact of recent interest rate cuts still to be felt and low unemployment boosting household spending. (Editing by Nick Zieminski)