June 27, 2018 / 1:19 PM / 5 months ago

TREASURIES-Yields fall as trade war concerns persist

* Trump eases some fears on Chinese investment restrictions

* Treasury to sell $36 bln five-year notes

By Karen Brettell

NEW YORK, June 27 (Reuters) - U.S. Treasury yields fell on Wednesday on continued concern about trade wars, though bonds gave back some price gains after U.S. President Donald Trump indicated that he would not impose restrictions on Chinese investments in U.S. technology firms.

Trump said he will use a strengthened security review process to deal with threats from Chinese investments.

The Treasury Department has recommended that Trump use the Committee on Foreign Investment in the United States (CFIUS), whose authority would be enhanced by new legislation in Congress, to control transactions. The legislation expands the scope of deals reviewed by the interagency panel to effectively address national security concerns.

“There were some headlines suggesting that Trump would ease up on some of his demands, that got people a little bit encouraged,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

However, “for the most part the specter of trade wars is still really weighing on risk here and that’s what’s keeping Treasuries better bid,” Goldberg said.

Benchmark 10-year notes gained 9/32 in price on the day to yield 2.847 percent, down from 2.880 percent late on Tuesday.

The yield curve between two-year and 10-year notes flattened to 32 basis points overnight, the lowest level since 2007.

Bonds were also in demand by portfolio managers rebalancing for month- and quarter-end.

The Treasury Department will sell $36 billion in five-year notes on Wednesday, the second sale of $100 billion in short- and intermediate-dated debt this week.

The Treasury sold $34 billion in two-year notes to solid demand on Tuesday. It will also sell $30 billion in seven-year notes on Thursday. (Editing by Susan Thomas) )

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