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TREASURIES-Bonds steady after solid growth data briefly lifts yields

Karen Brettell

* GDP slowed less than expected in second quarter

* Odds fall of Fed cutting rates by 50 bps next week

NEW YORK, July 26 (Reuters) - U.S. Treasuries were steady on Friday, after yields briefly rose on data showing that U.S. economic growth slowed less than expected in the second quarter. The data adds to recent evidence that the economy is improving even as global growth weakens. Gross domestic product increased at a 2.1% annualized rate in the second quarter as a surge in consumer spending blunted some of the drag from declining exports and a smaller inventory build. The strength here is encouraging, said Tom Simons, a money market economist at Jefferies in New York. Were seeing some evidence that things are accelerating here at the end of Q2 and into Q3. The Federal Reserve is viewed as certain to cut rates when it meets next week even as the U.S. economy improves. The U.S. central bank has cited concerns about the global manufacturing slowdown and inflation remaining below its target of 2% a year. The ongoing U.S.-China trade war is also seen as damaging business sentiment. But the Fed is seen as less likely to cut rates by 50 basis points given the U.S. economic improvement, with a 25-basis-point decrease more widely expected. Anybody whos still thinking that the Fed is considering going 50 basis points next Wednesday should probably abandon that expectation now at this point, Simons said.

Benchmark 10-year Treasuries were last up 1/32

in price to yield 2.070%, down from 2.074% late on Thursday. The yields rose as high as 2.100% immediately after the GDP data. Interest rate futures traders are pricing in only a 19 percent chance of a 50-basis-point cut by the Fed at next weeks meeting, according to the CME Groups FedWatch tool.

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