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TREASURIES-U.S. yields rise on trade outlook, setting aside economic data

By Ross Kerber

* Trump says U.S.-China trade talks going 'very well' * U.S. ISM services index falls in November * U.S. ADP private sector jobs number misses forecast (Recasts to focus on mixed economic data, adds investor comment, updates prices) By Ross Kerber BOSTON, Dec 4 (Reuters) - U.S. Treasury yields rose on Wednesday on an improved outlook for a U.S.-China trade deal, and as investors brushed off mixed U.S. economic data. The benchmark 10-year yield was up 7.4 basis points at 1.7827% in afternoon trading as the global appetite for risk increased. U.S. President Donald Trump said on Wednesday at a meeting of NATO leaders near London that talks with China were going "very well." In contrast, his comments on Tuesday raised the prospect of extended trade tensions between the world's two biggest economies, and pushed the 10-year Treasury yield the lowest since May 2018. Wednesday's turnaround showed a potential trade deal was more important to investors than a pair of relatively weak November U.S. economic reports. U.S. services sector activity slowed, and other data showed private employers hired the fewest workers in six months. "Trade is everything right now," said Mary Ann Hurley, vice president for fixed-income trading at D. A. Davidson. She also noted how Trump's mixed messages from day to day created volatility. "You get stuff out of Trump, it's 180 degrees different day by day. Either it (trade talks) are going really well, or he's not in a hurry to make a deal," she said. Tony Bedikian, head of global markets for Citizens Bank, said concrete trade steps are likely needed to move 10-year yields out of the range of 1.5% to 2% where they have traded since October. "Right now we are mired in this range, and we need some more definitive results coming out of the trade talks" before 10-year yields would again exceed 2%, he said. Traders are focused on the U.S. Labor Department's more comprehensive nonfarm payrolls report due out on Friday, which includes both public- and private-sector employment. The two-year yield, typically seen as indicator of interest rate expectations, rose 5.2 basis points to 1.5842% in afternoon trading. The spread between the two- and 10-year yields widened 2.05 basis points. The movement suggested investors overall expect the U.S. Federal Reserve to hold interest rates unchanged "for the foreseeable future," Bedikian said. December 4 Wednesday 2:27PM New York / 1927 GMT Price Current Net Yield % Change (bps) Three-month bills 1.5275 1.559 -0.020 Six-month bills 1.5325 1.5702 -0.011 Two-year note 99-214/256 1.5842 0.052 Three-year note 100-24/256 1.5922 0.062 Five-year note 99-126/256 1.6064 0.072 Seven-year note 99-104/256 1.7155 0.071 10-year note 99-184/256 1.7809 0.072 30-year bond 103-60/256 2.2264 0.066 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 1.50 0.25 spread U.S. 3-year dollar swap -2.75 0.50 spread U.S. 5-year dollar swap -3.25 0.00 spread U.S. 10-year dollar swap -7.75 0.25 spread U.S. 30-year dollar swap -34.00 0.25 spread (Reporting by Ross Kerber; Editing by Andrea Ricci and Richard Chang)