TREASURIES-US yields edge lower as markets watch US-China talks

June 10 (Reuters) - U.S. Treasury yields drifted lower on Tuesday as investors awaited the outcome of trade negotiations between Washington and Beijing.

Markets were also treading water ahead of Wednesday's consumer inflation data for May, which economists expect will show a slight increase as President Donald Trump's tariffs begin to drive up prices.

This week's Treasury auctions of three-, 10- and 30-year notes and bonds are likely to reveal whether appetite for U.S. sovereign debt is weakening among foreign investors wary of a worsening U.S. deficit, according to Gennadiy Goldberg, head of U.S. rates strategy at TD Securities.

Otherwise, markets are in wait-and-see mode, he said.

"I think markets are really just grinding sideways here," said Goldberg. "I'd say there's some general optimism around as yields are heading a little bit lower."

Economists surveyed by Reuters expect the core Consumer Price Index print, which excludes volatile food and fuel prices, for May to show an uptick of 0.1 point to 2.9% over the prior 12 months, reversing the cooling trend recorded in recent months and weighing on the odds of a Fed interest rate cut in the near future.

Futures markets are forecasting a rate cut at the Federal Reserve's September policy meeting.

Economists at Goldman Sachs said in an analyst note on Tuesday they expected Trump's import duties to cause "a somewhat larger boost" to monthly inflation numbers in the near future and predicted the year-on-year core consumer price index would move back up to 3.5% by December.

The yield on the benchmark U.S. 10-year Treasury note US10YT=TWEB was last down 4 basis points to 4.444%. The yield on the 30-year bond US30YT=TWEB fell 4.3 basis points to 4.911%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=TWEB, seen as an indicator of economic expectations, was at a positive 45.1 basis points.

The two-year US2YT=TWEB U.S. Treasury yield, which typically moves in step with interest rate expectations, fell 1.6 basis points to 3.987%.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities US5YTIP=TWEB was last at 2.338% after closing at 2.35% on June 9.

The 10-year TIPS breakeven rate US10YTIP=TWEB was last at 2.298%, indicating the market sees inflation averaging about 2.3% a year for the next decade.