* BOJ seen unlikely to alter stimulus next week
* Trump meeting with Europe on trade in focus
* Treasury to sell $36 billion in five-year notes
By Karen Brettell
NEW YORK, July 25 (Reuters) - U.S. Treasury prices gained on Wednesday in line with a rally in Japanese government bonds as investors doubted that the Bank of Japan will change its stimulus program when it meets next week.
Treasury yields had risen and the yield curve had steepened following a Reuters report on Friday that the Japanese central bank was discussing modifying its easing program, raising concerns about reduced demand for government debt.
Many analysts, however, see the Bank of Japan as unlikely to alter its policies this month, though it may indicate that it has begun discussions on the topic.
“The consensus is evolving that most don’t expect an actual change in policy in July,” said Brian Daingerfield, a macro strategist at NatWest Markets in Stamford, Connecticut. However, “the market is adjusting to the idea that a conversation about changes is starting a lot sooner than we thought.”
Benchmark 10-year notes gained 4/32 in price to yield 2.938 percent, down from 2.950 percent on Tuesday.
The yield curve between two-year and 10-year notes flattened to 29 basis points, from a high of 33 basis points on Tuesday, but held above the 23 basis point area reached last week, which was the flattest level in a decade.
Yields also have risen since U.S. President Donald Trump on Friday criticized the Federal Reserve’s interest rate policy.
Investors are next focused on a meeting on Wednesday between Trump and Jean-Claude Juncker, president of the European Commission, relating to trade agreements.
EU trade commissioner Cecilia Malmstrom told a Swedish newspaper on Wednesday that the bloc was preparing to introduce tariffs on $20 billion of U.S. goods if Washington imposes levies on imported cars.
“Today there is going to be more of a clear focus on trade and trade policy,” Daingerfield said.
The United States will also sell $36 billion in five-year notes on Wednesday, the second sale of $101 billion in coupon-bearing supply this week.
The Treasury Department saw strong demand for a $35 billion sale of two-year notes on Tuesday, which sold at the highest yield since 2008.
The government will also sell $30 billion in seven-year notes on Thursday.
This week’s economic focus will be Friday’s U.S. gross domestic product reading for the second quarter, which will be evaluated for indications on how last year’s tax overhaul and recent trade tariffs are influencing growth.
Reporting by Karen Brettell; Editing by Will Dunham