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TREASURIES-U.S. yields rise on U.S.-China trade optimism

By Gertrude Chavez-Dreyfuss

* U.S. considering concessions to China trade deal * ECB cuts rates, restarts quantitative easing * U.S. core CPI rises, but Fed still expected to ease * Mnuchin: govt seriously considering 50-year bond issue next year (Recasts, adds new comment, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, Sept 12 (Reuters) - U.S. Treasury yields turned higher on Thursday after early declines, boosted by a report suggesting that advisers to President Donald Trump were considering some concessions to a possible trade deal with China. U.S. yields earlier fell, moving in tandem with the European bond market, after the European Central Bank cut interest rates to a record low and said it would restart asset purchases to boost its slumping economy. But that move in Treasuries faded after Bloomberg News reported, that Trump administration officials have discussed offering a limited trade agreement to China that would delay and even roll back some U.S. tariffs for the first time in exchange for Chinese commitments on intellectual property and agricultural purchases. "The headlines on trade are pro-growth," said Jon Hill, senior rates strategist, at BMO Capital Markets in New York. "Trade is obviously hard to price and it could unwind with one tweet, but incrementally, this is a risk-on impulse." The report also unwound the move in the European bond market, after the ECB cut its deposit rate to an all-time low of -0.5% from -0.4%. The bank said it will restart bond purchases of 20 billion euros a month from November, it said in a statement. Germany's 10-year bond yield earlier tumbled, while 30-year debt fell almost 20 basis points at one point . Italian 10-year bond yields hit a record low of 0.782%. German bunds though last traded higher on the day at -0.551%. In late morning trading, U.S. benchmark 10-year note yields rose to 1.752% from 1.733% late on Wednesday. Yields on 30-year bonds were also higher at 2.221% from 2.208% on Wednesday. U.S. two-year yields were up at 1.692%, from Wednesday's 1.67%. The earlier ECB action overshadowed a stronger-than-expected U.S. core inflation number, which posted the largest annual gain in a year. The consumer price index excluding the volatile food and energy components gained 0.3% for a third straight month. The inflation report, however, should not prevent the Federal Reserve from raising interest rates later this month. U.S. Treasury Secretary Steven Mnuchin, meanwhile, on Thursday said the government is seriously considering issuing a 50-year bond next year. Andre Severino, global head of fixed Income at Nikko Asset Management in London, said he is in favor of ultra-long bonds. "If there's ever a market to launch those, this is the time. From the government's perspective, it makes a lot of sense," said Severino. "If there's infrastructure projects that need to be done, I think these are very attractive rates to finance those projects. And given the debt profile of the U.S., I think there would be tremendous demand for ultra-long bonds." Later on Thursday, the Treasury will sell $16.0 billion in 30-year bonds in an auction. September 12 Thursday 10:51 AM New York/1451 GMT Price Current Net Yield % Change (bps) Three-month bills 1.92 1.9614 -0.001 Six-month bills 1.845 1.8933 0.010 Two-year note 99-170/256 1.6744 0.004 Three-year note 99-174/256 1.6099 0.000 Five-year note 98-94/256 1.5934 0.001 Seven-year note 98-18/256 1.6696 -0.003 10-year note 99-16/256 1.7282 -0.005 30-year bond 101-12/256 2.202 -0.006 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap -1.00 0.50 spread U.S. 3-year dollar swap -3.50 0.75 spread U.S. 5-year dollar swap -6.50 0.50 spread U.S. 10-year dollar swap -12.00 0.00 spread U.S. 30-year dollar swap -42.00 0.25 spread (Reporting by Gertrude Chavez-Dreyfuss Editing by Raissa Kasolowsky and Chizu Nomiyama)