TREASURIES-U.S. yields slide, in line with Europe, after poor Chinese data

By Gertrude Chavez-Dreyfuss

* Weak China data weighs on U.S. Treasury yields * Solid demand at U.S. 3-year note auction * Focus on Fed meeting this week, with rates seen steady * ECB's Lagarde to hold 1st policy meeting on Thursday (Adds new comment, U.S. 3-year note auction results, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, Dec 9 (Reuters) - U.S. long-dated Treasury yields fell on Monday, after rising three straight days, as risk appetite waned following weak Chinese trade data that rattled bond investors worried about the impact of a prolonged trade battle between the United States and China. Treasury yields also dropped in line with those on global sovereign bonds. German benchmark bond yields for one, slid, disregarding unexpectedly strong German trade data. Yields on German 10-year yields held around -0.30%. But the bond market was more focused on data out of China given its ongoing trade talks with the United States. China's exports in November contracted for a fourth consecutive month, data showed. Overseas shipments fell 1.1% last month from a year earlier, compared with a 0.9% drop in October and a forecast of a 1.0% expansion based on a Reuters poll of analysts. "It's a risk-off day today," said Stan Shipley, fixed income strategist, at Evercore ISI in New York. "The data from China was discouraging. When you also look at sovereign bond yields, they're lower. That's kind of carried over into the U.S. market." In afternoon trading, U.S. 10-year note yields fell to 1.831%, from 1.843% late on Friday. Yields on 30-year bonds also slid to 2.266%, from 2.284% on Friday. On the short-end of the curve, however, U.S. two-year yields were up slightly at 1.625%, from Friday's 1.621%. The U.S. Treasury on Wednesday sold $38 billion in U.S. three-year notes with solid demand and a yield of 1.632%, just below the expected yield at the bid deadline. The bid-to-cover ratio was better at 2.56, compared with an average of 2.48, according to the U.S. Treasury website. There was little reaction though from the Treasury market after the auction, with the U.S. three-year note yield at 1.646% , up from Friday's 1.641%. Investors are also looking at a key events this week, which include Federal Reserve and European Central Bank meetings as well as a UK election. The Fed on Wednesday is expected to hold interest rates after it telegraphed that message at the last meeting when it cut interest rates for the third time this year. "Our own view is that the Fed will ultimately feel compelled to lower rates further, as the continued unpredictability of trade policy and the presidential election will restrain business spending and hiring, ultimately undermining the consumer," according to a research note from NatWest Markets. "With growth poised to fall short of policymakers' expectations, we look for the Fed to cut rates twice next year (March and June) in 2020." At the European Central Bank, new chief Christine Lagarde will hold her first policy meeting on Thursday. She is expected to signal a commitment to the ECB's recent stimulus package, with no major policy changes. December 9 Monday 2:59PM New York / 1959 GMT Price Current Net Yield % Change (bps) Three-month bills 1.515 1.5458 0.023 Six-month bills 1.52 1.557 0.008 Two-year note 99-193/256 1.6272 0.006 Three-year note 99-242/256 1.6441 0.003 Five-year note 99-52/256 1.6676 -0.001 Seven-year note 99-16/256 1.7685 -0.010 10-year note 99-72/256 1.8294 -0.014 30-year bond 102-104/256 2.2638 -0.020 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 1.00 -0.25 spread U.S. 3-year dollar swap -2.75 0.00 spread U.S. 5-year dollar swap -3.00 0.25 spread U.S. 10-year dollar swap -7.00 0.25 spread U.S. 30-year dollar swap -33.00 0.00 spread (Reporting by Gertrude Chavez-Dreyfuss Editing by Nick Zieminski)