(Adds analyst comment, yield curve, updates yields)

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Comments by Fed's Waller highlight slower private-sector

hiring

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US 10-year, 30-year yields set for third straight weekly

rise

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US housing starts rise in June

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US consumer inflation expectations dip

By Gertrude Chavez-Dreyfuss

NEW YORK, July 18 (Reuters) - U.S. Treasuries rose on

Friday, dragging yields lower, after Federal Reserve Governor

Christopher Waller pushed for a rate cut later this month,

citing a slowdown in private-sector hiring.

Technical buying also contributed to the move higher in

Treasury prices after being sold for most of the week, analysts

said. U.S. Treasury yields across the curve hit multiweek peaks

earlier this week.

Analysts specifically pointed to the 10-year note, which

showed that momentum indicators have moved to oversold

territory, suggesting a pullback was under way.

Friday's economic reports were mixed, providing little

clarity on the day's rate moves. The benchmark 10-year yield was

down 3 basis points (bps) at 4.434%, but up for a

third straight week. U.S. 30-year yields slipped, down 1.4 bps

at 5.001%, but were also on track for their third

consecutive weekly rise.

The two-year yield, which reflects interest rate

expectations, fell 3.9 bps to 3.878%. On the week,

the yield was down 3.7 bps, its largest weekly decline since

June 23.

Analysts noted that Waller's comments kept Treasuries well-bid

earlier in the session. He reiterated his stance late on

Thursday and on Friday that the Fed should cut interest rates at

the end of this month amid mounting risks to the economy and the

strong likelihood that tariff-induced inflation will not drive a

persistent rise in price pressures.

Waller was also concerned about private-sector hiring starting

to slow.

"Comments by Waller about potentially cutting rates this

month seem to be spurring some optimism overall," said Zachary

Griffiths, head of investment-grade and macro strategy at

CreditSights in Charlotte, North Carolina.

"It's propelling not only a rally in Treasuries, but risk

sentiment more broadly."

Griffiths said Waller has made his stance on rate cuts

well-known for several weeks, but his focus on the labor market

instead of inflation caught the market's attention.

"It's opening this front that the labor market is weaker,

and introducing this idea or justification for earlier moves."

Bond investors, however, expect the Fed to remain on hold at

this month's policy meeting. The U.S. rate futures market,

though, has very slightly increased the odds of a rate cut in

July to 4.7% from about 3% a few days ago in the wake of

Waller's comments, according to LSEG estimates. The September

probability, which was about 50-50 on Thursday, increased to 61%

on Friday.

RESILIENT ECONOMY

On the data front, Friday's numbers continued to depict an

economy that is fairly resilient, with some pockets of weakness.

U.S. housing starts, for one, increased by 4.6% in June,

higher than expectations. Multi-family housing starts also

rebounded sharply. But single-family housing starts, which

account for the bulk of homebuilding, dropped 4.6% to a

seasonally adjusted annual rate of 883,000 units last month, the

lowest level since July 2024.

Another report - the University of Michigan Surveys of

Consumers - showed that consumer sentiment remained upbeat while

inflation expectations declined. The Consumer Sentiment Index

rose to 61.8 this month from a final reading of 60.7 in June.

Economists polled by Reuters had forecast the index would

increase to 61.5.

Data further showed consumers' 12-month inflation

expectations dropped to 4.4% from 5.0% in June. Long-run

inflation expectations fell to 3.6% from 4.0% last month.

Dan Siluk, head of global short duration and liquidity at

Janus Henderson Investors, said the underlying message from the

data is that the U.S. economy remains strong, even though

political uncertainty, especially on trade policy, could lead to

bouts of additional volatility.

But he noted that rates on the front end of the U.S. curve

remained in the 3.80%-4% range.

"From an investor perspective, that's a good thing in the

sense (that) you're able to comfortably allocate and put capital

or put risk to work ... So we're comfortable with that stubborn

resilience in the economy, but we have to be cautiously

optimistic as investors because of the uncertainty."

In other parts of the bond market, the yield curve steepened

slightly on Friday, with the gap between two-year and 10-year

yields at 54.9 bps, up from 54.4 bps late on

Thursday.

The U.S. yield curve has stabilized, pulling back from

massive steepening on Wednesday, following initial news reports

that President Donald Trump planned to fire Fed Chair Jerome

Powell. Trump denied those reports.

The curve hit 61.8 bps on Wednesday, the widest spread since

April, reflecting a selloff in longer-dated debt on concerns

that the Fed under a new chairman could cut rates aggressively,

reigniting inflation.