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TREASURIES-Yields fall on worries over US-China trade spat, data

* Daimler (IOB: 0NXX.IL - news) issues negative profit guidance due to trade war

* Italy appoints euroskeptics to key govt posts

* Philly Fed data disappoints

(Recasts, adds new comment, byline, Treasuries table, updates

prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, June 21 (Reuters) - U.S. Treasury yields dropped

on Thursday, pressured by worries over a continuing U.S. trade

battle with China that triggered a cut in forecast earnings by

German carmaker Daimler, as well as U.S. data that came in lower

than expected.

Benchmark U.S. 10-year note and 30-year bond yields have

fallen in two of the last three sessions as U.S.-China trade

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tensions increased.

"The trade war is still a factor," said Jim Vogel, interest

rates strategist, at FTN Financial in Memphis, Tennessee. "There

was an awful lot of buying of Treasuries overnight as people

both watched Daimler and Italy."

On Tuesday, trade tensions between China and the United (Shenzhen: 000925.SZ - news)

States intensified after President Donald Trump threatened to

impose a 10 percent tariff on $200 billion of Chinese goods

while Beijing warned it would fight back.

Daimler cut its 2018 profit forecast and said

late on Wednesday import tariffs on cars exported from the

United States to China would hurt sales of its Mercedes (Xetra: 710000 - news) -Benz

cars. Another German carmaker BMW (EUREX: BMWE.EX - news) said on

Thursday it was looking at "strategic options" amid the trade

war.

Italy also weighed on U.S. yields after the Italian

government appointed two euroskeptics to head key finance

committees.

In mid-morning trading, U.S. 10-year yields fell to 2.896

percent, from Wednesday's 2.928 percent.

Ian Lyngen, head of U.S. rates strategy at BMO Capital, said

the 10-year yield is up against the 74-day moving average of

2.91 percent, which has proven to be a "focal point" rather than

the breakout trigger that he initially envisioned.

U.S. 30-year yields slid to 3.038 percent,

compared with 3.064 percent on Wednesday.

On the short end, U.S. two-year note yields slipped to 2.541

percent, from 2.562 percent late on Thursday.

Italy's 10-year government bond yield rose 14 basis points

to a one-week high of 2.72 percent, while two-year

borrowing costs rose 25 basis points to 0.84 percent.

Thursday's data did not help yields, with a U.S.

mid-Atlantic (Shanghai: 600558.SS - news) business survey for June coming in below

expectations, while a weekly report on jobless claims showed

mixed results.

The Philadelphia Fed business conditions index fell to 19.9,

compared with expectations for a 29.0 reading. The index was at

34.4 in May.

"There was some buying after a miss in Philly Fed," said

FTN's Vogel. "It is one of the first indicators of turns in

economic sentiment."

U.S. initial jobless claims, meanwhile, dropped 3,000 to a

seasonally adjusted 218,000 for the week ended June 16. However,

claims data for the prior week was revised to show 3,000 more

applications received than previously reported.

June 21 Thursday 10:36AM New York / 1436 GMT

Price

US T BONDS SEP8 144-2/32 0-18/32

10YR TNotes SEP8 119-224/256 0-68/256

Price Current Net

Yield % Change

(bps)

Three-month bills 1.895 1.9305 -0.002

Six-month bills 2.0675 2.1182 -0.013

Two-year note 99-236/256 2.5411 -0.021

Three-year note 99-242/256 2.6441 -0.028

Five-year note 99-240/256 2.7634 -0.033

Seven-year note 100-36/256 2.8524 -0.035

10-year note 99-212/256 2.8949 -0.033

30-year bond 101-184/256 3.037 -0.027

DOLLAR SWAP SPREADS

Last (bps) Net (LSE: 0LN0.L - news)

Change

(bps)

U.S. 2-year dollar swap 26.50 1.25

spread

U.S. 3-year dollar swap 23.00 1.00

spread

U.S. 5-year dollar swap 14.75 1.00

spread

U.S. 10-year dollar swap 6.75 0.75

spread

U.S. 30-year dollar swap -7.25 0.00

spread

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette

Baum)