TREASURIES-US yields rise as Trump names trade tariffs, before supply

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Trade in focus as Trump names trade tariffs

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US Treasury to sell $119 bln coupon-bearing supply

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Fed to release minutes from latest meeting on Wednesday

(Updates to New York afternoon)

By Karen Brettell

July 7 (Reuters) - Longer-dated U.S. Treasury yields rose on Monday as U.S. President Donald Trump announced tariffs on numerous trading partners ahead of the U.S. Treasury Department's sale of $119 billion in coupon-bearing supply this week.

The tariffs include a 25% levy on imports from Japan and South Korea beginning August 1.

Trump in April capped all of the so-called reciprocal tariffs with trading partners at 10% until July 9 to allow for negotiations. Only two agreements, with Britain and Vietnam, have been reached.

Investors worry that tariffs will increase prices and slow down growth, though uncertainty over the ultimate policies may be a bigger drag as it leads businesses to postpone decisions.

"It's this uncertainty that is really holding companies off from letting workers go, hiring new ones, and making investment decisions, and so the longer that that uncertainty lasts, the more I think the paralysis could lead to material economic weakness," said Will Compernolle, macro strategist at FHN Financial in Chicago.

Yields jumped and traders pared bets on how many times the Federal Reserve is likely to cut interest rates this year after jobs data for June on Thursday showed employers added more jobs than economists had forecast.

Some analysts noted that the underlying details of the report were weak, with nearly half of the increase in nonfarm payrolls coming from the government sector.

Fed funds futures traders are pricing in 50 basis points of cuts by the year-end, down from 66 basis points on Thursday before the data was released.

That implies that traders no longer see a chance for a third 25 basis point cut this year. U.S. markets were closed on Friday for the U.S. Independence Day holiday.

The Fed will release minutes from its June 17-18 meeting on Wednesday.

The yield on benchmark U.S. 10-year notes was last up 5.7 basis points on the day at 4.397%. The interest rate sensitive two-year yield rose 1.9 basis points to 3.901%.

The yield curve between two-year and 10-year notes steepened by around four basis points to 50 basis points.

Supply this week is also in focus with the Treasury due to sell $58 billion in three-year notes on Tuesday, $39 billion in 10-year notes on Wednesday and $22 billion in 30-year bonds on Thursday.

Demand for the longer-dated debt will likely be supported by U.S. Treasury Secretary Scott Bessent's recent comments that he does not plan to increase the auction sizes of the longer-dated debt at current interest rates.

"For bond investors that are really living in the moment, what does the deficit matter if coupon auction sizes aren't going to change," said Compernolle. "It just kicks the can down the road, but I think that has really put a lid on any sort of market response."

Bank of America analysts said last week they expect the U.S. Treasury will keep the auction sizes of longer-dated debt steady through fiscal 2027, after previously expecting increases to begin in February 2026.

Tom Simons, chief U.S. economist at Jefferies, said however that concerns about increases in longer-dated debt auctions are likely to remain, as the fiscal picture worsened after Congress last week passed a tax and spending bill that will increase the deficit and add trillions in debt over the coming decade.

The bill increases the debt ceiling by $5 trillion.

The Treasury will announce its refunding plans for the next two quarters later this month, which will be evaluated for any new clues on issuance changes.

If the Treasury does not increase longer-dated auction sizes it will rely more on bill issuance to finance its operations. It is also expected to increase sales of bills as it replenishes its cash balance following the increase in the debt ceiling.

"Treasury is expected to ramp up net T-bill issuance in order to replenish its cash balance closer to $850bn by the end of the quarter," analysts at JPMorgan said in a report.

"Combined with larger deficit-financing needs, we now expect an even larger ramp-up in net T-bill issuance over coming months than we had previously assumed."

The Treasury said on Monday it delayed its auctions of 13- and 26-week bills for a few hours due to technical issues.

(Reporting by Karen Brettell; editing by Barbara Lewis and Richard Chang)