TREASURIES-Yields slip on persistent U.S.-China trade issue, 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

(Adds analyst comment, updates prices, table)

By Gertrude Chavez-Dreyfuss

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

Thursday on worries about a continuing U.S. trade battle with

China that prompted German carmaker Daimler AG to cut

its 2018 profit forecast, and as U.S. data fell below

expectations.

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

tensions increased.

On Tuesday, President Donald Trump threatened to impose a 10

percent tariff on $200 billion of Chinese goods while Beijing

warned it would fight back.

"It's another safe-haven bid for Treasuries given the trade

jitters and concerns about Italy," said Kim Rupert, managing

director of global fixed income at Action Economics in San

Francisco.

Daimler said late Wednesday that tariffs on U.S. car imports

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

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

Thursday it was looking at "strategic options" because of the

trade war.

Italy, the third largest euro zone economy, also weighed on

U.S. yields after the country's government appointed two

euroskeptics to head key finance committees.

In afternoon trading, U.S. 10-year yields fell to 2.904

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 3.05 percent,

compared with 3.064 percent on Wednesday.

On the short end, U.S. two-year note yields slipped to 2.545

percent, from 2.562 percent late on Thursday.

Italy's 10-year government bond yield rose to a one-week

high of 2.72 percent, while two-year borrowing costs

rose to 0.84 percent.

A U.S. mid-Atlantic (Shanghai: 600558.SS - news) business survey for June came 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.

U.S. initial jobless claims 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.

As trade issues linger, investors will be looking at bond

supply next week for clues about the market's direction.

The U.S. Treasury said on Thursday it would sell $100

billion of securities next week, including $34 billion of 2-year

notes on Tuesday, $36 billion of five-year notes on Wednesday,

and $30 billion of seven-year notes on Thursday.

June 21 Thursday 2:37PM New York / 1837 GMT

Price

US T BONDS SEP8 143-25/32 0-9/32

10YR TNotes SEP8 119-208/256 0-52/256

Price Current Net

Yield % Change

(bps)

Three-month bills 1.895 1.9305 -0.002

Six-month bills 2.06 2.1105 -0.020

Two-year note 99-234/256 2.5452 -0.017

Three-year note 99-238/256 2.6496 -0.022

Five-year note 99-230/256 2.7719 -0.024

Seven-year note 100-24/256 2.8598 -0.027

10-year note 99-192/256 2.904 -0.024

30-year bond 101-120/256 3.0497 -0.014

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 23.25 1.25

spread

U.S. 5-year dollar swap 14.50 0.75

spread

U.S. 10-year dollar swap 6.25 0.25

spread

U.S. 30-year dollar swap -7.50 -0.25

spread

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette

Baum and Richard Chang)