By Tatiana Bautzer NEW YORK, Oct 27 (Reuters) – Yields on U.S. Treasuries rose on Monday as hopes of a China and U.S. trade deal boosted risk appetite and investors worried about U.S. economy data availability and its effect on future interest rates. The yield on the benchmark U.S. 10-year Treasury note was up 2.3 basis points in late morning trading, at 4.02%. Bonds did not react as positively as equities to the signs of progress in the talks. "It may be an effect of the risk-on movement that reduces demand for safer assets, but also the lack of data and also how it will affect the interest rate trajectory", said Tom Di Galoma, managing director at Mischler Financial Group. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, rose up to 3.2 basis points in the morning, but pared gains to 2.8 basis points, at 3.512% after the Treasury auctioned $69 billion of these notes. The large supply available, with another $70 billion auction of 5-year notes, may also be a factor in rising yields, Galoma added. Investors see a 25-basis point rate cut in the Federal Open Market Committee meeting on Wednesday as certain, specially after the September CPI release on Friday. Data showed pressures of import tariffs pass-throughs were so far weaker than expected, BMO analysts led by Ian Lyngen said in a note to clients on Monday. The interest rate trajectory through December looks less certain as the prevailing uncertainties won’t be resolved in the near-term, they added. Even if the government reopens in November, the effect on data availability could extend well into 2026. In this context, the U.S. consumer confidence data to be released on Tuesday by the Conference board will be watched more closely than usual. The yield on the 30-year bond rose 0.5 basis points to 4.591%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 50.4 basis points. The 10-year TIPS breakeven rate was last at 2.303%, indicating the market sees inflation averaging about 2.3% a year for the next decade. (Reporting by Tatiana Bautzer Editing by Nick Zieminski)
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