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Investors brace for strong consumer price index report

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US-China trade talks could impact global growth

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Yields on 10-year Treasury note slightly down

(Recasts; updates prices; adds data forecasts, fresh comment in

paragraphs 1-2 and 4-14)

By Douglas Gillison

June 9 (Reuters) - U.S. Treasury yields were modestly

lower on Monday afternoon, after rising on Friday following an

unexpectedly strong May jobs report.

The uptick in demand for Treasuries came ahead of planned

auctions for three-, 10- and 30-year U.S. notes and bonds this

week and U.S. inflation data on Wednesday. U.S. and Chinese

officials also met in London for trade negotiations.

Employment data reported on Friday by the Labor Department

on bolstered the view the U.S. economy will prove more resilient

than feared while the outcome of the Trump administration's

multi-front trade war remains uncertain.

"There's no risk-off move, what with equities doing all

right on the day," said Guy LeBas, chief fixed income strategist

at Janney Montgomery Scott.

LeBas added that he expected "cautious demand" at this

week's auctions but that inflation data for May was likely to be

a little warmer.

"This is really the first period in which firms had the

opportunity to adjust prices for the tariffs," he said.

Economists are expecting Wednesday's Consumer Price Index

data to show the core rate rose 0.1 point year over year to

2.9%, according to a Reuters poll. This would mark a reversal in

the slowing trend recorded since January and could weigh on

chances the Federal Reserve will cut interest rates soon.

Futures markets suggest investors believe the Fed is

unlikely to cut rates before September's Fed meeting.

Yields on the benchmark U.S. 10-year Treasury note

were last down 3.6 basis points to 4.474%. The

yield on the 30-year bond fell 1.6 basis points to

4.947%.

Bond yields move inversely to prices, meaning they rise

when demand weakens.

The curve between yields on two- and 10-year Treasury notes

, seen as an indicator of economic expectations,

was at a positive 47.3 basis points.

Economic data on Monday from the Commerce Department showed

wholesale inventories rose 0.2% in April, versus a consensus

expectation by economists polled by Reuters that they would

remain unchanged.

The two-year U.S. Treasury yield, which

typically moves in step with interest rate expectations, fell

4.6 basis points to 3.997%.

The breakeven rate on five-year U.S. Treasury

Inflation-Protected Securities (TIPS) was last at

2.350% after closing at 2.359% on Friday.

The 10-year TIPS breakeven rate was last at

2.312%, indicating the market sees inflation averaging about

2.3% a year for the next decade.