TREASURIES-US yields dip as market watches geopolitics, potential Trump policies

By Tatiana Bautzer

NEW YORK, Nov 21 (Reuters) - U.S. Treasury yields slipped on Thursday, drawing safe-haven bids on news of a Russian missile attack on Ukraine and after a mixed set of economic data showing the world's largest economy is gradually slowing.

"Markets are watching geopolitics and signs of Trump policies (and) there is no clear trend with very small variations in yields," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.

Russia's attack, if confirmed, came after Ukraine fired U.S. and British missiles at targets inside Russia this week despite warnings by Moscow it would view such action as a major escalation.

In midmorning trading, the yield on benchmark U.S. 10-year notes fell 1.8 basis points to 4.382%.

On the short end of the curve, the U.S. two-year note yield , which typically moves in step with interest rate expectations, slipped 1 bp to 4.298%.

U.S. yields dipped after the release of Thursday's economic data. Weekly jobless claims unexpectedly fell and was slightly below consensus estimates. However, the number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 36,000 to a seasonally adjusted 1.908 million during the week ending Nov. 9, data also showed.

The Philadelphia Federal Reserve business conditions index, a barometer of the economic health in the mid-Atlantic region, fell to 5.5 in November, from a reading of 10.3 last month.

The U.S. yield curve flattened on Thursday, with the gap between two- and 10-year yields at 8.4 bps, down from 9.1 bps late on Wednesday. The yield curve has been on a steepening trend the last few weeks with the launch of the Federal Reserve's easing cycle in September.

Treasury yields have risen over the past two months since investors began betting on President-elect Donald Trump's victory, with Republicans also taking control of Congress. Market participants are now looking for clarity regarding Trump's policies, including the next round of jobs and inflation data that is likely to influence Fed policy.

Investors are also attentive to the choice of the next Treasury secretary, as Trump widened the list of candidates to include Apollo CEO Marc Rowan and former Fed Governor Kevin Warsh, as well as hedge fund manager Scott Bessent.

Investors are also keeping an eye on reactions to arrest warrants issued by the International Criminal Court for Israeli Prime Minister Benjamin Netanyahu, as well as a Hamas leader, Ibrahim Al-Masri, for alleged war crimes and crimes against humanity in the Gaza conflict. (Reporting by Tatiana Bautzer; editing by Jonathan Oatis)