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TREASURIES-U.S. yields rise, reversing early losses, on positive trade news

By Gertrude Chavez-Dreyfuss

By Gertrude Chavez-Dreyfuss NEW YORK, Nov 21 (Reuters) - U.S. Treasury yields rose on Thursday after falling for three straight sessions, bolstered by more positive news on trade negotiations with China and unwinding most of this week's safe-haven demand. "The market is very sensitive to trade headlines," said Tom Simons, economist, at Jefferies in New York. "We've had some negative headlines this week, but today the news was positive." The Chinese commerce ministry said on Thursday Beijing will strive to reach an initial trade agreement with the United States as both sides keep communication channels open. China is willing to work with the United States to resolve each other's core concerns on the basis of equality and mutual respect, and will try hard to reach a "phase one" deal, Gao Feng, spokesman at the ministry, told reporters. The news came after a series of headlines earlier this week that suggested ongoing trade talks were unraveling. Reuters reported on Wednesday negotiations to finalize a deal may extend into next year as Beijing presses for more extensive tariff rollbacks and the Trump administration counters with heightened demands of its own. That news came after the U.S. Senate on Tuesday unanimously passed legislation aimed at protecting human rights in Hong Kong, which provoked a strong reaction from China and fueled a safe-haven rally in Treasuries on Tuesday and Wednesday. With bond investors focused on trade, Thursday's mixed economic data had little impact on the Treasury market. Initial U.S. weekly jobless claims were unexpectedly unchanged at a five-month high last week, suggesting some softening in the labor market. Other reports, on the other hand, showed a mild pick up in factory activity in the mid-Atlantic region this month, but manufacturers reported a sharp slowdown in new orders, shipments and unfilled orders. There is more good news in the housing market, with U.S. home sales increasing more than expected in October and house prices rising at the fastest pace in more than two years. Analysts said Thursday's batch of data seemed to back the Fed's decision to put rate cuts on hold. "That's what happens when the Federal Reserve takes itself out of the picture when they signaled a pause in rate cuts," Jefferies' Simons said, adding that U.S. economic data did not really matter. On Wednesday, the Fed released the minutes of last month's monetary policy meeting, which showed the Fed deciding to hit the pause button in its easing cycle following a rate cut at the meeting. In morning trading, U.S. 10-year note yields rose to 1.758%, up from Wednesday's 1.738%. Yields on 30-year bonds were up at 2.22%, up from 2.203% on Wednesday. On the short-end of the curve, U.S. two-year yields edged up to 1.602%, from Wednesday's 1.572%. The yield curve steepened on Thursday amid more upbeat trade news, as investors reversed six straight sessions of flattening. The spread between the two-year and 10-year note yields widened to as much as 18.5 basis points. November 21 Thursday 10:33 AM New York/1533 GMT Price Current Net Yield % Change (bps) Three-month bills 1.5375 1.5692 -0.003 Six-month bills 1.545 1.583 0.005 Two-year note 99-210/256 1.5943 0.022 Three-year note 100-34/256 1.5792 0.019 Five-year note 99-130/256 1.604 0.020 Seven-year note 99-144/256 1.692 0.023 10-year note 99-236/256 1.7586 0.021 30-year bond 103-88/256 2.2216 0.019 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap -2.00 -0.50 spread U.S. 3-year dollar swap -4.50 -0.25 spread U.S. 5-year dollar swap -7.00 0.00 spread U.S. 10-year dollar swap -10.75 0.25 spread U.S. 30-year dollar swap -38.50 0.50 spread (Reporting by Gertrude Chavez-Dreyfuss Editing by Nick Zieminski)