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TREASURIES-U.S. yields rise on data, report on Trump, Warsh meeting

* Reports on Trump, Warsh meeting raise bets on more hawkish Fed

* U.S. Midwest factory activity shows resilience, inflation muted

* Treasuries set to eke out 0.06 percent return in third quarter

NEW YORK, Sept 29 (Reuters) - Most U.S. Treasury yields edged higher on Friday on encouraging data about steady economic growth and reports U.S. President Donald Trump met with former Federal Reserve Governor Kevin Warsh about a potential nomination to head the U.S. central bank. In light of his past stance against expansion of the Fed's balance sheet, Warsh is seen as more hawkish than current Fed Chair Janet Yellen, analysts said. "He's quite a contrast to Yellen," said Gennadiy Goldberg, interest rates strategist at TD Securities in New York. "She might be replaced by someone who's relatively more hawkish." Consumer spending nudged up 0.1 percent in August but a gauge of U.S. Midwest factory activity unexpectedly rose in September despite disruptions stemming from hurricanes Harvey and Irma. Friday's data didn't change traders expectations the Fed would raise short-term rates in December. Longer-dated yields were supported by a deceleration in a measure of the core rate on personal consumption expenditure, the Fed's preferred inflation gauge. The annual rise in the core PCE slowed to 1.3 percent in August, the weakest reading since November 2015. At 11:52 a.m. (1552 GMT), the benchmark 10-year U.S. Treasury note yield was up 1 basis point at 2.316 percent, while the 30-year yield was down 0.9 basis point at 2.859 percent. The two-year yield was up over 1 basis point at 1.471 percent, not too far from the near nine-year peak it reached this week. For the month, Treasury yields were on track to post their biggest monthly increase since November during a global market sell-off following Trump's surprise presidential victory. The two-year yield has risen 14 basis points in September; the 10-year yield is up 20 basis points and the 30-year yield more than 13 basis points. U.S. government debt is on track to record a slim return of 0.06 percent for the third quarter, bringing its year-to-date gain to 2.31 percent, according to an index compiled by Barclays and Bloomberg. The $14 trillion sector has experienced a choppy quarter. Bond yields fell in July and August on soft economic data and anxiety about tensions between North Korea and the United States over Pyongyang's nuclear weapons program. They have turned higher in September with the 10-year yield hitting an 11-week high this week on hints the Fed may raise rates in December and Trump's roll-out of a tax plan that raised concerns it may increase the federal deficit and borrowing.

September 29 Friday 11:53AM New York / 1553 GMT Price

US T BONDS DEC7 152-27/32 0-2/32 10YR TNotes DEC7 125-108/256 -0-32/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 1.045 1.0622 0.005 Six-month bills 1.17 1.1932 0.000 Two-year note 99-208/256 1.4707 0.016 Three-year note 99-90/256 1.6006 0.023 Five-year note 99-210/256 1.9129 0.018 Seven-year note 99-216/256 2.1492 0.014 10-year note 99-108/256 2.3157 0.009 30-year bond 97-204/256 2.8601 -0.008

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 25.25 0.50

spread

U.S. 3-year dollar swap 23.50 0.00

spread

U.S. 5-year dollar swap 7.50 0.00

spread

U.S. 10-year dollar swap -4.50 -0.25

spread

U.S. 30-year dollar swap -33.50 -0.25

spread

(Reporting by Richard Leong; Editing by Chizu Nomiyama and James Dalgleish)