August 23, 2018 / 2:02 PM / a month ago

TREASURIES-Bonds steady before Fed's Powell speaks on Friday

* Fed’s Powell due to speak on Friday

* China, U.S. implement new trade tariffs

* 2 yr-10 yr yield curve further flattens

By Karen Brettell

NEW YORK, Aug 23 (Reuters) - U.S. Treasuries were little changed on Thursday ahead of a speech by Federal Reserve Chairman Jerome Powell on Friday, after minutes from the U.S. central bank’s most recent meeting showed that further interest rate hikes are likely soon.

Fed officials discussed raising rates soon to counter excessive economic strength but also examined how global trade disputes could batter businesses and households, according to the minutes, released on Wednesday.

The minutes were “mostly status quo” and “really lacked any specifics on any changes to monetary policy,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. “Everybody’s on wait-and-see mode for Jackson Hole tomorrow.”

Powell will speak at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming.

His speech will be watched for any new indications on the Fed’s planned pace of rate hikes, as well as any response he might offer to criticism by U.S. President Donald Trump, who told Reuters on Monday that he is “not thrilled” with rate increases under Powell.

Kansas City Federal Reserve Bank President Esther George said on Thursday that two more rate hikes this year “could be appropriate.”

Futures traders are pricing in a 96 percent chance of a rate hike in September, and a 62 percent likelihood of a December rate rise, according to the CME Group’s FedWatch Tool.

Benchmark 10-year notes were last up 2/32 on the day to yield 2.817 percent, down from 2.824 percent on Wednesday.

The difference in yield between 2-year and 10-year notes narrowed to 21 basis points, making for the flattest yield curve since 2007.

Investors also focused on trade tensions as the United States and China escalated their acrimonious trade war on Thursday, implementing punitive 25 percent tariffs on $16 billion worth of each other’s goods.

That came as mid-level officials from both sides resumed talks in Washington.

Investors are further considering whether the guilty plea of Trump’s former lawyer Michael Cohen to campaign finance violations on Tuesday and the conviction of former campaign manager Paul Manafort on charges of tax and bank fraud will hurt the president and the Republican Party’s prospects in mid-term elections. )

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