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TREASURIES-Yields fall, U.S.-China trade talks in focus

Karen Brettell

* US-China to meet on trade at G20 summit

* Iran concerns boosts demand for Treasuries

* Treasury to sell $113 billion notes this week

NEW YORK, June 24 (Reuters) - U.S. Treasury yields fell on Monday, holding just above almost three-year lows, ahead of trade talks between the U.S. and China later this week. Investors are focused on whether U.S. President Donald Trump and Chinese President Xi Jinping can de-escalate the trade war between the two countries when they meet at the G20 summit in Japan. Tariffs between the two counties has been blamed on slowing international growth, which has promoted global central banks to adopt looser policies. Thats one of the biggest uncertainties in the market right now, and has an effect on data and growth, said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.

Benchmark 10-year notes were last up 10/32 in

price to yield 2.033 percent, down from 2.066 percent on Friday. The yields fell to their lowest since November 2016 on Thursday, a day after the Federal Reserve signaled interest rate cuts as early as July to battle growing global and domestic economic risks. Interest rate futures traders are pricing in a 64 percent chance of a 25 basis point cut in July, and a 36 percent chance of a 50 basis point cut, according to the CME Groups FedWatch tool. Trump again criticized the U.S. central bank on Monday for not cutting interest rates, keeping up his pressure on the central bank to change its policies. Rising tensions between the United States and Iran have also boosted safe haven buying of U.S. debt. Trump said on Saturday he would impose fresh sanctions on Iran but he wanted to make a deal to bolster its flagging economy, an apparent move to defuse tensions following the shooting down of an unmanned U.S. drone this week by the Islamic Republic. Demand for bonds from investors rebalancing accounts for quarter-end is also expected this week. The Treasury Department will sell $113 billion in coupon-bearing supply this week, including $40 billion in two-year notes on Tuesday, $41 billion in five-year notes on Wednesday and $32 billion in seven-year notes on Thursday.

(Editing by David Gregorio)

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