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TREASURIES-Yield curve steepens on Washington spending plans, jobs data

 (Updates with market activity, analyst comment)
    By Ross Kerber
    Feb 4 (Reuters) - Longer-term U.S. Treasury yields were
higher on Thursday as investors positioned for a large pandemic
relief package from Washington and a stabilizing U.S. labor
market.
    The benchmark 10-year yield was up a basis point
at 1.1409% in afternoon trading. 
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 103 basis points, about a basis point
higher than Wednesday's close. Earlier it reached 104 basis
points, the most since May 2017.
    The risk-on trading tracked equities trading as Wall
Street's main indexes climbed.
    Tom Simons, money market economist for Jefferies LLC, said
the steeper yield curve reflected a stronger-than-expected jobs
report and expectations that Democrats in Washington would pass
a $1.9 trillion COVID-19 relief package without Republican
support.
    Both factors pointed to improving economic activity. 
Inflationary pressure also seemed to be rising, he said,
although inflation will be tricky to measure because springtime
price comparisons will be with data taken during 2020's economic
shutdowns in many areas.
    Forces like foreign demand for U.S. Treasuries stabilized
their prices on Thursday and kept yields from rising further,
said Kim Rupert, senior economist for Action Economics. 
    "Considering the rally in Treasuries and the extent of the
spending proposals, one would think yields would be even
higher," she said. 
    The ADP National Employment Report on Wednesday showed
private payrolls increased by 174,000 jobs last month, more than
expected.
    The yield on the three-month U.S. Treasury note
was at 0.0355%, down a basis point and its lowest since March.
It has fallen steadily in recent days, which Action's Rupert
said reflected lower bill issuance.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down less
than a basis point at 0.1152% in afternoon trading.
    The 20-year U.S. Treasury yield was at 1.7396%,
up 2 basis points and its highest since the note was
re-introduced last May.
    
      February 4 Thursday 2:01PM New York / 1901 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.035        0.0355    -0.010
 Six-month bills               0.0525       0.0532    -0.008
 Two-year note                 100-5/256    0.1152    -0.002
 Three-year note               99-208/256   0.1889    0.000
 Five-year note                99-148/256   0.4607    0.002
 Seven-year note               99-152/256   0.8099    0.002
 10-year note                  97-140/256   1.1409    0.010
 20-year bond                  93-236/256   1.7396    0.019
 30-year bond                  93-24/256    1.931     0.019
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50         0.25    
 spread                                               
 U.S. 3-year dollar swap         9.25         0.25    
 spread                                               
 U.S. 5-year dollar swap        11.75         0.50    
 spread                                               
 U.S. 10-year dollar swap        7.00         1.00    
 spread                                               
 U.S. 30-year dollar swap      -22.25         1.00    
 spread (Reporting by Ross Kerber in Boston; Editing by Andrea Ricci
and Diane Craft)
  
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