TREASURIES-US yields dip ahead of China trade talks

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China talks front and center on bond investors' radar

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Trump says 80% tariffs on China imports seem right

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Fed fund futures lower odds of July easing

By Gertrude Chavez-Dreyfuss

NEW YORK, May 9 (Reuters) - U.S. Treasury yields slipped on Friday, with thinner volume than usual and sentiment still uncertain, as investors looked ahead to talks between the Trump administration and China over the weekend in Geneva on tariffs.

There was a bit of short-covering going on in Treasuries following a selloff on Thursday that pushed yields to multi-week highs, amid a U.S.-UK trade deal, the first such agreement since President Donald Trump imposed worldwide tariffs on April 2.

It was a deal that sparked a rally in U.S. equities, and the dollar, while pushing Treasury prices lower and yields higher, as investors looked to take on more risk.

Trump said more deals are set to follow the UK trade pact.

Ahead of the China negotiations, Trump said on Friday that an 80% tariff on Chinese goods "seems right," making his first suggestion of a specific alternative to the 145% levies he has imposed on China.

U.S. stock futures briefly dipped after the Trump news, while the 10-year yield slipped. The U.S. president's comments did not match earlier speculation, reported by Bloomberg, that Treasury Secretary Scott Bessent, who is heading the U.S. delegation, and his group have set a target of reducing tariffs below 60% as a first step.

Mike Venuto, co-founder and chief investment officer at Tidal Financial Group in New York, was not optimistic about the upcoming China talks.

"It will take more time than we want to. I would expect further uncertainty because trade deals even when you have good partners which are working in good faith will take a year to work out," he said.

"What we have seen so far is simply symbolic. There's a lot of wood to chop. People are just looking for any piece of good news that is more or less sustainable."

In late morning trading, the benchmark 10-year yield slid 1.8 basis points (bps) to 4.355%. On Thursday, following the UK trade deal, the yield hit a two-week high.

U.S. 30-year yields, meanwhile, were little changed at 4.828%.

On the front end of the curve, the two-year yield , which reflects interest rate expectations, fell 5.2 bps to 3.845%. It hit a three-week peak on Thursday.

Federal Reserve speakers on Friday did not say anything earth-shattering so far, suggesting that policy remains on hold for the foreseeable future given tariff uncertainty.

Following the UK trade agreement, the benchmark federal funds futures market has lowered the odds of a rate cut at the July 29-30 policy meeting to 62%, from around 70% on Wednesday, according to LSEG calculations. It also sees about 71 bps of easing this year, from 82 bps on Wednesday. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci)