* Corporate debt issuance expected to pick up
* Italian budget hopes improves risk sentiment
* Friday's U.S. jobs data in focus
By Karen Brettell
NEW YORK, Sept 4 (Reuters) - U.S. Treasury yields rose on Tuesday as investors prepared for heavy corporate debt supply and as falling Italian debt yields reduced safety demand for U.S. government debt.
Companies including Caterpillar and Pfizer Inc are planning debt sales this week as investors return from summer vacations, with September typically being among the most popular months for corporate debt issuance.
“The big rebound in corporate supply is the theme this week,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. “That’s probably what’s pushing the curve a little bit steeper this morning, if you have some of the rate locking going through.”
Higher expectations that Italy’s 2019 deficit will not breach the limit set by the European Union also added a modest boost to risk sentiment on Monday.
Benchmark 10-year notes fell 10/32 in price to yield 2.88 percent, up from 2.853 percent on Friday. The yield curve between two-year and 10-year notes steepened to 25 basis points, from 23 basis points.
The Treasury market was closed on Monday for the Labor Day holiday.
Jobs data for August on Friday is this week’s major economic focus and will be evaluated for further indications on the strength of the labor markets and wage pressures.
The jobs report is seen as unlikely to sway the Federal Reserve from raising interest rates this month for a third time this year. Futures traders are pricing in a 98 percent chance of a rate hike at the conclusion of the U.S. central bank’s Sept. 25-26 meeting.
The odds of an additional hike in December is seen as less sure, with traders pricing in a 71 percent chance, according to the CME Group’s FedWatch Tool.
Investors are also focused on trade tensions with China and Canada this week.
U.S. President Donald Trump is prepared to quickly ramp up a trade war with China and has told aides he is ready to impose tariffs on $200 billion more in Chinese imports as soon as a public comment period on the plan ends this week, Bloomberg News reported on Thursday.
Contentious U.S.-Canada trade talks are set to resume on Wednesday, after ending on Friday with no deal to revamp the North American Free Trade Agreement. (Reporting by Karen Brettell; Editing by Andrea Ricci) )