Wires

TREASURIES-U.S. yields advance as positive China trade news lift sentiment

Gertrude Chavez-Dreyfuss

* China says will try to reach phase one trade deal

* U.S. economic data were mixed, had little impact on Treasuries

* U.S. yield curve steepens

(Updates prices, adds new comment) NEW YORK, Nov 21 (Reuters) - U.S. Treasury yields rose on Thursday after falling for three straight sessions, bolstered by more positive news on U.S.- China trade negotiations and the unwinding of most of this week's safe-haven demand. The Chinese commerce ministry said on Thursday Beijing will strive to reach an initial bilateral trade agreement as both sides keep communication channels open. Gao Feng, spokesman at the ministry, told reporters China will try hard to reach a "phase one" deal. "The Chinese comment ... is, I guess, less negative than the headlines that hit yesterday," said Ellis Phifer, market strategist, at Raymond James in Memphis, Tennessee. "You got a lot of machines moving, a lot of algos moving - I guess that had a lot to do with yesterday's moves. So today's headlines have given a near-term calming effect to the market," he added. Thursday's remarks from China came after a series of headlines earlier this week that suggested ongoing trade talks were unraveling, prompting a safe-haven rally in U.S. Treasuries. Some market participants said the steep rise in Treasury prices on Wednesday that pushed U.S. long-term yields to three-week lows were driven by so-called algorithmic or systematic traders. Reuters reported on Wednesday that negotiations to finalize a deal may extend into next year as Beijing presses for more extensive tariff rollbacks. That news came after the U.S. Senate on Tuesday unanimously passed legislation aimed at protecting human rights in Hong Kong, provoking a strong reaction from China. Overall, Raymond James' Phifer believes a "phase one" deal will eventually get done. "I think it helps both economies if they get some of the uncertainty out of the way." But said he did not think a big trade deal was coming. "I think the U.S. and China would continue talking after a preliminary deal. And we will have the same ups and downs like what we're getting right now," Phifer said. With bond investors focused on trade, Thursday's mixed economic data had little impact on the Treasury market. Initial U.S. weekly jobless claims were unexpectedly unchanged at a five-month high last week, suggesting some softening in the labor market. Other reports though showed a mild pick up in factory activity in the mid-Atlantic region this month, but manufacturers reported a sharp slowdown in new orders, shipments and unfilled orders. In afternoon trading, U.S. 10-year note yields rose to 1.774%, up from Wednesday's 1.738%. Yields on 30-year bonds were up at 2.235%, up from 2.203% on Wednesday. On the short-end of the curve, U.S. two-year yields edged up to 1.606%, from Wednesday's 1.572%. The yield curve steepened on Thursday on more upbeat trade news, reversing six straight sessions of flattening. The spread between the two-year and 10-year note yields widened to as much as 16.90 basis points.

November 21 Thursday 3:46 PM New York/2046 GMT

Price Current NetYield % Change

(bps)

Three-month bills 1.545 1.5768 0.005Six-month bills 1.5525 1.5908 0.013Two-year note 99-204/256 1.6066 0.035Three-year note 100-24/256 1.5926 0.033Five-year note 99-118/256 1.6139 0.030Seven-year note 99-124/256 1.704 0.03510-year note 99-208/256 1.7706 0.03330-year bond 103-32/256 2.2315 0.028

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap -2.50 -1.00

spread

U.S. 3-year dollar swap -5.00 -0.75

spread

U.S. 5-year dollar swap -7.50 -0.50

spread

U.S. 10-year dollar swap -11.50 -0.50

spread

U.S. 30-year dollar swap -38.75 0.25

spread

(Reporting by Gertrude Chavez-Dreyfuss Editing by Nick Zieminski and Richard Chang)