TREASURIES-U.S. yields tumble on trade war fears, growth worries

(Adds dropped word "know" in 5th paragraph)

By Gertrude Chavez-Dreyfuss

NEW YORK, May 23 (Reuters) - U.S. Treasury yields dropped

across the board on Thursday as risk appetite diminished on

continued concerns about global growth and the worsening trade

conflict between the United States and China.

U.S. 30-year bond yields sank to roughly 16-month lows,

while those on benchmark 10-year notes fell to their lowest

level since December 2017, as shares around the world took a

nose dive.

In another sign of growing market anxiety, two yield curve

indicators briefly inverted on Thursday.

"A lot of these has to do with growth concerns and the

potential for this trade war not to end," said Ellis Phifer,

market strategist at Raymond James in Memphis, Tennessee.

"We are in risk-off mode ahead of this weekend because we

don't know what's going to happen. The tensions are still too

high and we had weekends before filled with additional news," he

added.

Investors worried that this raging U.S.-China trade spat

could intensify and further undermine global growth.

China on Thursday called out the United States, saying it

needs to correct its "wrong actions" for trade talks to continue

after it blacklisted Chinese telecommunications equipment maker

Huawei Technologies.

In mid-morning trading, U.S. 10-year note yields fell to

2.332% from 2.393% late on Wednesday, after earlier

sliding to 2.327%, its lowest since December 2017.

Technical charts suggest the break of support in the 2.338%

area on the 10-year could see the note drop to the 2.28% region,

Action Economics said.

Yields on U.S. 30-year bonds slid to 2.766% from

2.819% on Wednesday. Thirty-year yields earlier slumped to

2.762%, a 16-month low.

On the short end of the curve, U.S. 2-year yields were down

at 2.17% from Wednesday's 2.231%.

Two yield curve measures briefly inverted. The gap in yield

between U.S. 3-month and 10-year notes, as well as that between

2-year and 5-year notes fell, suggesting

expectations of slower economic growth.

"The 2s/5s inversion is in mini-panic mode, one reason to

term this morning a risk-off move even though it has its

rationale in fundamentals more than events," said Jim Vogel,

senior rates strategist, at FTN Financial in Memphis, Tennessee.

"In this case, events are a contributor," he added.

Britain's trouble-plagued attempt to leave the European

Union has also helped boost U.S. bond prices.

Prime Minister Theresa May tenuously held on to power on

Thursday after her final Brexit gambit backfired. May's

departure will deepen the Brexit crisis as a new leader is

likely to want a more decisive split.

U.S. yields fell as well after a pair of U.S. economic data

-- manufacturing activity, new home sales -- showed weakness.

May 23 Thursday 10:03AM New York / 1403 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 2.315 2.3608 -0.017

Six-month bills 2.3375 2.4047 -0.002

Two-year note 100-40/256 2.1667 -0.064

Three-year note 100-16/256 2.1031 -0.068

Five-year note 100-154/256 2.1208 -0.068

Seven-year note 101 2.2185 -0.066

10-year note 100-96/256 2.3326 -0.060

30-year bond 102-60/256 2.7648 -0.054

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 5.25 -0.25

spread

U.S. 3-year dollar swap 3.50 -0.50

spread

U.S. 5-year dollar swap 0.50 -0.50

spread

U.S. 10-year dollar swap -5.00 -0.25

spread

U.S. 30-year dollar swap -28.50 -0.50

spread

(Reporting by Gertrude Chavez-Dreyfuss

Editing by Nick Zieminski)