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TREASURIES-Yields fall as economic optimism fades, retail sales disappoint

 (Adds comments from Fed's Powell, updates prices)
    By Karen Brettell
    NEW YORK, Nov 17 (Reuters) - U.S. Treasury yields fell on
Tuesday as data showed U.S. retail sales increased less than
expected in October, underscoring expectations that growth might
slow this quarter.
    Retail sales rose 0.3% last month, below economists’
expectations of 0.5%. Spending has been restrained by spiraling
COVID-19 infections and declining household income as millions
of unemployed Americans lose government financial
support.
    “This is the first sign that Q4 is going to be pretty weak,”
said Tom Simons, a money market economist at Jefferies in New
York. “The government failed to deliver on any kind of stimulus
package...We’re starting to see the effect of inaction over the
summer now.”
    Optimism over vaccines that claim to have a high success
rate against COVID-19 has boosted risk sentiment in the past
week, sending benchmark 10-year yields to eight-month highs. 
    But the rollout of any vaccine will take time and the
government is unlikely to launch new stimulus until at least
next year.
    Benchmark 10-year yields fell three basis points
to 0.872%, after reaching 0.975% last week.
    The yield curve between two-year and 10-year notes
 flattened three basis points to 70 basis points.
    Federal Reserve Chair Jerome Powell said on Tuesday it was
not time to shut down emergency programs aimed at battling the
economic fallout from the coronavirus pandemic, with cases again
surging and the economy left with "a long way to go" to recover.

    The Fed is expected to shift more of its bond purchases to
longer-dated debt if it views yields as rising too far, though
Powell did not comment on this on Tuesday.
    On Monday, Fed Vice Chair Richard Clarida appeared to
downplay speculation that the Fed will change its $120 billion
program of monthly bond purchases as soon as December.
    He said he was not concerned by a recent small rise in U.S.
Treasury bond yields, and that borrowing costs are still "very
accommodative".
    The Treasury Department will sell $27 billion in 20-year
bonds on Wednesday and $12 billion in 10-year Treasury
Inflation-Protected Securities (TIPS) on Thursday.
    
  November 17 Tuesday 3:01PM New York / 2001 GMT
                               Price                  
 US T BONDS DEC0               172-19/32    0-22/32   
 10YR TNotes DEC0              138-76/256   0-68/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.085        0.0862    -0.003
 Six-month bills               0.095        0.0964    -0.005
 Two-year note                 99-231/256   0.1752    -0.004
 Three-year note               100-18/256   0.2264    -0.008
 Five-year note                99-86/256    0.3856    -0.022
 Seven-year note               99-32/256    0.6289    -0.030
 10-year note                  100-8/256    0.8717    -0.034
 20-year bond                  95-80/256    1.3975    -0.032
 30-year bond                  99-252/256   1.6257    -0.033
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.25         0.00    
 spread                                               
 U.S. 3-year dollar swap         7.50        -0.25    
 spread                                               
 U.S. 5-year dollar swap         6.00        -0.25    
 spread                                               
 U.S. 10-year dollar swap       -0.50        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -33.25        -0.50    
 spread (Reporting by Karen Brettell
Editing by Mark Heinrich)
  
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