Wires

TREASURIES-U.S. bond yields slip on trade jitters, CPI miss

Reuters.

* Fresh U.S. levies on Chinese goods go into effect

* Investors assess impact from latest round of tariffs

* U.S. CPI rises in April, underlying inflation stays benign

(Adds background, quotes) NEW YORK, May 10 (Reuters) - U.S. Treasury yields dipped on Friday, with longer-dated yields hovering at five-week lows on demand for low-risk bonds spurred by worries about trade tension between China and the United States and data that showed domestic inflation remains tame. The United States escalated a tariff war with China on Friday by raising duties on $200 billion worth of Chinese goods amid last-ditch talks to rescue a trade deal, as U.S. President Donald Trump signaled that talks could drag on beyond this week.

Investors have scooped up U.S. government bonds in a safe-haven move this week in response to the trade conflict between the world's biggest economic powers, which they fear may spiral into a global economic slowdown. The pace of Treasury purchases slowed on Friday as investors assessed the impact from the latest round of U.S. tariffs and possible Chinese retaliation, analysts said. "Now past the shock that trade negotiations are no longer on schedule, investors will have to rely on private economists to develop new forecasts of the economic impact of tariffs or new goals for U.S.-China trade," said Jim Vogel, interest rates strategist at FTN Financial in Memphis, Tennessee. At 9:37 a.m. (1337 GMT), benchmark 10-year Treasury yields were down 0.4 basis point at 2.4529%. They fell to a five-week low at 2.424% on Thursday. On the week, 10-year yields were on track to fall 8 basis points, the steepest drop in seven weeks. Adding to downward pressure on yields on Friday was a mildly weaker-than-forecast report on U.S. consumer prices. The government's consumer price index increased 0.3% in April, less than the 0.4% increase forecast by analysts polled The latest CPI reading reinforced the notion that the Federal Reserve would leave key lending rates unchanged this year, although the futures market still implied traders expect a 60% chance of a rate cut at the end of the year. "For the Fed, the disappointment in the April CPI report is not likely to materially change the clear majority view that some significant part of recent soft inflation numbers is transitory," TD Securities analysts wrote in a research note. May 10 Friday 9:27AM New York / 1327 GMT Price

US T BONDS JUN9 148-25/32 3/3210YR TNotes JUN9 124-12/256 2/32Price Current NetYield % Change

(bps)

Three-month bills 2.375 2.4219 -0.012Six-month bills 2.375 2.4366 -0.012Two-year note 100 2.2498 -0.018Three-year note 99-192/256 2.2116 -0.013Five-year note 100-12/256 2.2399 -0.013Seven-year note 100-60/256 2.3383 -0.01010-year note 99-88/256 2.4494 -0.00830-year bond 100-8/256 2.8734 -0.008YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 19.80 1.4530-year vs 5-year yield 63.20 1.75

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 9.50 0.00

spread

U.S. 3-year dollar swap 6.75 -0.25

spread

U.S. 5-year dollar swap 3.75 0.25

spread

U.S. 10-year dollar swap -2.25 0.00

spread

U.S. 30-year dollar swap -26.25 -0.25

spread

(Reporting by Richard Leong; editing by Jonathan Oatis)