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TREASURIES-Yields rise as trade optimism boosts stocks

Karen Brettell

* Yields rise as risk sentiment improves

* Month-end demand caps bond weakness

* Consumer spending rose in July

NEW YORK, Aug 30 (Reuters) - U.S. Treasury yields edged higher on Friday as stocks rose on hopes that the United States and China will take steps to de-escalate their trade war, which has been blamed for worsening business sentiment. The two countries gave signs on Thursday that they will resume trade talks as the two economic superpowers discussed the next round of in-person negotiations in September ahead of a looming deadline for additional U.S. tariffs. A new round of U.S. tariffs on some Chinese goods is scheduled to take effect on Sunday, threatening to escalate the already bitter trade war. Demand for Treasuries for month-end extension was seen capping bond weakness on Friday, though trading volumes were light ahead of Mondays U.S. Labor Day holiday. Its a decent-size extension, but volumes are very, very light as to be expected ahead of the holiday, said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. The bond market will be closed on Monday. Investors are likely to remain nervous about the impact of worsening U.S.-Sino trade relations as economic growth weakens globally, which should maintain demand for safe-haven debt. "It definitely feels like there are buyers of safe havens around the globe," said Lederer. The yield curve between 2-year and 10-year notes on Wednesday was the most inverted since 2007 at minus 6.50 basis points, a signal that a recession is likely in one to two years.

The curve was last minus 1.30 basis points.Thirty-year bond yields fell to record lows of

1.905% on Wednesday as investors sought out safe-haven debt. They rose back to 1.987% on Friday. Data on Friday showed that U.S. consumer spending increased solidly in July as households bought a range of goods and services, though the pace of growth in consumption is unlikely to be sustained amid tepid income gains.

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