TREASURIES-U.S. prices slide, dip likely short-lived on trade fears

    * China denounces U.S.' Pompeo for fabricating rumors
    * Risks remain skewed to downside for U.S. yields -analyst
    * U.S. durables for April were weaker than expected.

 (Recasts; adds new comments, bullets, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 24 (Reuters) - U.S. Treasury prices fell on
Friday as investors booked profits from the previous day's steep
rally, although the decline was seen as a blip as the festering
U.S.-China trade conflict could fuel further safe-haven buying.
    Volume thinned ahead of a long holiday weekend, with the
market closed on Monday for Memorial Day.
    "Risks are skewed toward lower yields with the prospects of
a prolonged trade war," said Subadra Rajappa, head of U.S. rates
strategy at Societe Generale in New York.
    China on Friday denounced U.S. Secretary of State Mike
Pompeo for fabricating rumors after he said the chief executive
of China's Huawei Technologies Co Ltd          was lying about
his company's ties to the Beijing government.
    The United States placed Huawei on a trade blacklist last
week, effectively banning U.S. firms from doing business with
the world's largest telecom network gear maker.
    U.S. Treasury prices surged on Thursday, as yields fell to
multi-month lows on the worsening trade tension between the
world's two largest economies. On Friday, however, those yields
climbed back from their lows on profit-taking, said Tom Simons,
economist, at Jefferies & Company in New York. 
    "The combination of uncertainty and the impact on the
Federal Reserve likely enhances what we suspected was already a
strong appetite to buy any dip in the Treasury market," said
NatWest Markets in a research note.
    Some analysts said Friday's decline in bond prices could
have also been fueled by comments from President Donald Trump
late Thursday. He said U.S. complaints against Huawei might be
resolved within the framework of a U.S.-China trade deal.

    Analysts said Trump's comments provided some optimism about
an eventual trade agreement.
    The outlook for Treasuries and other sovereign bonds could
also partly be determined by what happens in Britain and its
acrimonious attempt to leave the European Union.
    British Prime Minister Theresa May said on Friday she would
quit after failing to deliver Brexit, setting up a race to
replace her.
    Former Foreign Minister Boris Johnson has appeared to be the
favorite to replace May and was first out of the blocks to say 
Britain should be prepared to leave the EU without a deal to
force the bloc to offer a "good deal."
    Johnson's emergence and his "no-Brexit" stance could be
supportive for Treasuries overall, Jefferies' Simons said.
    In afternoon trading, U.S. 10-year note yields rose to
2.323% from 2.296% late on Thursday.
    Yields on U.S. 30-year bonds advanced to 2.751%,
from 2.732% on Thursday.
    On the short end of the curve, U.S. 2-year yields were up at
2.168% from Thursday's 2.129%.
    U.S. yields came off their highs, however, after data showed
new orders for U.S.-made capital goods fell more than expected
in April.
   Friday, May 24 at 1511 EDT (1911 GMT):
                               Price        Current   Net
                                            Yield %   Change
 Three-month bills             2.2975       2.3423    -0.023
 Six-month bills               2.32         2.3859    -0.008
 Two-year note                 100-39/256   2.1683    0.039
 Three-year note               100-12/256   2.1085    0.040
 Five-year note                100-152/256  2.1222    0.035
 Seven-year note               101          2.2183    0.036
 10-year note                  100-116/256  2.3237    0.028
 30-year bond                  102-128/256  2.7519    0.020
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
 U.S. 2-year dollar swap         3.00        -1.50    
 U.S. 3-year dollar swap         1.25        -1.50    
 U.S. 5-year dollar swap        -0.50        -0.50    
 U.S. 10-year dollar swap       -5.50         0.25    
 U.S. 30-year dollar swap      -28.75         0.50    
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler
and Richard Chang)