* Yields lower as optimism on U.S. China trade deal fades * Fed seen likely to cut rates later this month * Brexit negotiations in focus By Karen Brettell NEW YORK, Oct 15 (Reuters) - U.S. Treasury yields edged lower on Tuesday as investors pared back expectations that the United States and China are close to reaching an agreement to end their trade war. Reports of a "Phase 1" trade deal between the United States and China last week encouraged risk taking and reduced demand for safe-haven debt, however the dearth of details around the agreement has since curbed this enthusiasm. U.S. Treasury Secretary Steven Mnuchin said on Monday that an additional round of tariffs on Chinese imports will likely be imposed if a trade deal with China is not reached, but added that he expected the agreement to go through. “Any good news was going to bring a big reaction and the idea that the U.S. sort of oversold the accomplishment wasn’t a complete surprise either, and was perhaps factored in to some of the reaction last week,” said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. Benchmark 10-year yields rose to a three-week high of 1.767% on Friday, before dropping to 1.720% on Tuesday. The bond market was closed on Monday for the Columbus Day holiday. Retail sales data on Wednesday is the next major economic focus and will be evaluated for the strength of U.S. consumer confidence. The Federal Reserve is expected to cut rates when it meets on October 29-30 though Fed policymakers are divided on whether further cuts are needed for the economy. Investors are also focused on Europe where officials from Britain and the EU will meet at a summit on Thursday and Friday that will determine whether Britain is headed for a deal to leave the bloc on Oct. 31, a disorderly no-deal exit or a delay. Price Current Net Yield % Change (bps) Three-month bills 1.64 1.6738 -0.008 Six-month bills 1.6275 1.6679 -0.013 Two-year note 99-215/256 1.5834 -0.031 Three-year note 99-120/256 1.5571 -0.029 Five-year note 99-202/256 1.5443 -0.033 Seven-year note 99-248/256 1.6297 -0.038 10-year note 99-36/256 1.7203 -0.033 30-year bond 101-12/256 2.2019 -0.012 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 4.50 0.00 spread U.S. 3-year dollar swap 1.25 0.00 spread U.S. 5-year dollar swap -0.75 -0.25 spread U.S. 10-year dollar swap -8.25 0.00 spread U.S. 30-year dollar swap -38.50 -0.50 spread (Editing by Nick Zieminski)
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