TREASURIES-U.S. long-dated yield climbs to four-week peak on renewed trade optimism

By Gertrude Chavez-Dreyfuss NEW YORK, Dec 12 (Reuters) - U.S. Treasury yields spiked on Thursday, with the long end hitting four-week highs after President Donald Trump said his government is close to forging a "big deal" on trade with China. The Treasury market has been sensitive to trade headlines. A deal with the world's second-largest economy should ease some concerns about a global slowdown and support the Federal Reserve's stance of holding interest rates steady. "Getting VERY close to a BIG DEAL with China," Trump said on Twitter. "They want it, and so do we." Trump was expected to meet with his top trade advisers on Thursday to discuss the Dec. 15 tariffs deadline, sources have told Reuters. "The latest spike in yields came after Trump's tweet and this just speaks to how sensitive the market is to anything trade-news related," said Jon Hill, vice president, rates strategy at BMO Capital Markets in New York. "But it would be really hard to break out of any trading range at least in Treasuries, until we get something concrete and definite. There has been so much noise in both directions that it makes so much sense to re-price a little with the new news, but not aggressively re-price." A Wall Street Journal report, citing sources, saying U.S. negotiators have offered to cancel new China tariffs set to take effect on Dec 15 further boosted yields. U.S. negotiators have also offered to cut existing tariff rates by up to 50% on $360 billion of Chinese imports. In morning trading, the yield on the U.S. 10-year note rose to 1.871%, from 1.79% late on Wednesday. Earlier in the session, 10-year yields hit 1.883%, a four-week high. Yields on 30-year bonds were up at 2.305%, from 2.22% on Wednesday, touching the highest level since mid-November of 2.317% in earlier trading. On the short end of the curve, U.S. two-year yields rose to 1.656%, from Wednesday's 1.615%. Two-year yields climbed to a four-week peak of 1.666%. As trader worries eased, the yield curve steepened for the first time in four days, with the spread between the two-year and 10-year note yields widening to 21.5 basis points . December 12 Thursday 10:19 AM New York/1519 GMT Price Current Net Yield % Change (bps) Three-month bills 1.545 1.5768 0.005 Six-month bills 1.54 1.5779 0.013 Two-year note 99-177/256 1.6602 0.045 Three-year note 99-212/256 1.684 0.059 Five-year note 98-254/256 1.7126 0.075 Seven-year note 98-188/256 1.8193 0.085 10-year note 98-216/256 1.8782 0.088 30-year bond 101-112/256 2.3082 0.088 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 1.00 0.00 spread U.S. 3-year dollar swap -3.00 -0.25 spread U.S. 5-year dollar swap -3.75 -0.50 spread U.S. 10-year dollar swap -7.75 -0.25 spread U.S. 30-year dollar swap -32.50 0.25 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)