TREASURIES-Yields rise before Treasury auction, on trade optimism

Karen Brettell

(Adds data, updates prices)

* Treasury to sell $84 bln in notes, bonds this week

* Trade deal optimism reduces safe haven demand for bonds

* ISM non-manufacturing data on Tuesday in focus

NEW YORK, Nov 4 (Reuters) - U.S. Treasury yields rose on Monday ahead of this week's Treasury Department debt auctions, and as risk sentiment improved on optimism about a deal to de-escalate the U.S.-China trade war. The Treasury will sell $84 billion in debt as part of its quarterly refinancing, including $38 billion in three-year notes on Tuesday, $27 billion in 10-year notes on Wednesday and $19 billion in 30-year bonds on Thursday. "The market is refocused on the refunding that's going to take place this week," said Michael Lorizio, senior fixed income trader at Manulife Asset Management in Boston. At the same time, optimism about a U.S.-China trade deal reduced demand for safe haven U.S. bonds. The countries said on Friday they made progress in talks aimed at defusing a nearly 16-month-long trade war that has harmed the global economy, and U.S. officials said a deal could be signed this month.

Benchmark 10-year notes fell 18/32 in price to

yield 1.789%, up from 1.728% late Friday. Risk appetite has also improved since U.S. jobs data on Friday showed that job growth slowed less than expected in October while wages rose. The next major U.S. economic focus will be the Institute of Supply Management's (ISM) services report on Tuesday. The ISM said on Friday the manufacturing sector contracted for the third consecutive month in October. However, the service sector "is the larger portion of the economy and with the weakness that we've seen in ISM manufacturing if we see any sort of cracks in this measure, then that could indicate that perhaps the economy is on a weaker footing than we anticipated," Lorizio said. Data on Monday showed new orders for U.S.-made goods fell more than expected in September and business spending on equipment was slightly weaker than initially thought, suggesting that manufacturing remains soft amid the U.S.-China trade war. The Federal Reserve last Wednesday cut interest rates for the third time this year and indicated that further reductions may not be forthcoming. Investors remain concerned, however, that a slowing U.S. economy may force the Fed's hand.

(Editing by Susan Fenton; Editing by Richard Chang)