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TREASURIES-U.S. yields rise to multi-week highs on fading trade tensions, data

By Gertrude Chavez-Dreyfuss

* U.S. retail sales rise more than expected * China exempts some U.S. goods from additional tariffs * Highest weekly rise since June 2013 for 10-year yields * Biggest weekly increase since Nov 2016 for 30-year yields * Largest weekly gain since June 2009 for U.S. 2-year yield * U.S. curve steepens, gap widest in four weeks (Adds new comment, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, Sept 13 (Reuters) - U.S. Treasury yields climbed to multi-week peaks on Friday, as trade tensions between the United States and China eased further after more conciliatory measures, with U.S. recession risks continuing to diminish after stronger-than-expected retail sales data. U.S. yields rose for five straight sessions. Yields on U.S. benchmark 10-year notes and 2-year notes hit six-week highs, while those on 30-year bonds hit five-week peaks. The 10-year yield posted its largest weekly rise since June 2013, while the 30-year yields had their biggest weekly increase since U.S. President Donald Trump's election in November 2016. On the short end of the curve, the U.S. 2-year yield had its highest weekly increase since June 2009. After inverting in August, the U.S. yield curve steepened a bit more on Friday, a sign that recession worries are abating. The spread between U.S. 2-year note and 10-year note yields widened to as much as nearly 11 basis points, the steepest curve in four weeks. "We have the continued warming of relationships over the trade talks. And we have the consumer still strong with retail sales, and those two just added fuel to the fire," said Ellis Phifer, market strategist at Raymond James in Memphis, Tennessee. "Have we turned the corner on (interest) rates? I don't know if it's a complete turn. We have had a reversal for now, but we have trade talks coming up and we have the Federal Reserve meeting coming up. There is a lot of potential news that could turn us back around." On Friday, China's official Xinhua News Agency reported that Beijing will exempt some agricultural products from additional tariffs on U.S. goods. The United States and China have both made amicable gestures, with China renewing purchases of U.S. farm goods and Trump delaying a tariff increase on certain Chinese goods. On the data front, U.S. retail sales increased more than expected in August, rising 0.4%, lifted by spending on motor vehicles, building materials, healthcare and hobbies. The consensus forecast was for a 0.2% gain in August. Excluding automobiles, gasoline, building materials and food services, retail sales climbed 0.3% last month. In afternoon trading, U.S. benchmark 10-year note yields rose to 1.901% from 1.791% late on Thursday, hitting a six-week high of 1.903%. Yields on 30-year bonds were also higher at 2.373% from 2.264% on Thursday, touching a five-week high of 2.378%. U.S. 2-year yields, on the other hand, hit a six-week peak of 1.802%. They were last up at 1.799%, from Thursday's 1.727%. "We had quite a run after the July Fed meeting, and yields fell precipitously," said Lou Brien, market strategist at DRW Trading in Chicago. "So sometimes it's like water in a bathtub where water splashes up against one side and then inevitably splashes against the other." September 13 Friday 3:14PM New York / 1914 GMT Price Current Net Yield % Change (bps) Three-month bills 1.9225 1.9637 0.008 Six-month bills 1.87 1.9189 0.021 Two-year note 99-108/256 1.802 0.075 Three-year note 99-60/256 1.7634 0.091 Five-year note 97-160/256 1.7524 0.101 Seven-year note 97-8/256 1.8315 0.104 10-year note 97-140/256 1.8976 0.107 30-year bond 97-116/256 2.3693 0.105 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap -1.75 0.00 spread U.S. 3-year dollar swap -4.75 -0.50 spread U.S. 5-year dollar swap -6.50 0.25 spread U.S. 10-year dollar swap -11.50 0.50 spread U.S. 30-year dollar swap -41.50 1.00 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Kevin Liffey, Steven Orlofsky and Jonathan Oatis)