* Fears about trade wars ease, boosting stocks
* North Korean hopes reduce bond safety bid
* Corporate bond hedging seen weighing on prices
NEW YORK, March 6 (Reuters) - U.S. Treasury yields rose slightly on Tuesday in line with higher stocks on optimism that U.S. President Donald Trump may back down from proposed steel and aluminum tariffs that have prompted concerns about a global trade war. Top U.S. Republican politicians, including House of Representatives Speaker Paul Ryan, on Monday urged Trump not to go ahead with tariffs on foreign imports of steel and aluminum.
Even though the president said he would not back down, he suggested Canada and Mexico could be exempted if a new North American Free Trade Agreement (NAFTA) was reached, which many market participants see as the main motivation behind the plan. "It does seem as though Trump has laid out the fact that he's using these tariffs as a negotiating tactic," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York, adding that bonds are "tracking equity sentiment."
Benchmark 10-year notes were last down 1/32 in
price to yield 2.88 percent, up from 2.87 percent on Monday. News that North and South Korea will hold their first summit in more than a decade in late April also helped reduce demand for safe-haven U.S. bonds. The head of a South Korean delegation that recently met with North Korean leader Kim Jong Un revealed that North Korea said there was no need to keep its nuclear program as long as there was no military threat against it and that the country was open to talking with the United States regarding denuclearization and normalizing ties. Hedging needs as CVS Health Corp announced a nine-part corporate bond sale were also seen as weighing on bonds.
The major economic focus this week will be Fridays employment report for February, which will be evaluated for further signs of wage strength as an indicator of inflation. U.S. job growth surged in January and wages increased further, recording their largest annual gain in more than 8-1/2 years, bolstering expectations that inflation will push higher this year as the labor market hits full employment. If January's wage growth is revised downward, however, that could boost bond prices and reduce bullish expectations on how many interest rate hikes the Federal Reserve will make this year. "If you get a downward revision, it could temper some of this market optimism about four rate hikes this year," said Goldberg.
(Editing by Jonathan Oatis)