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TREASURIES-U.S. bond yields fall on election uncertainty, stimulus bets scaled back

 (Updates yields, adds analyst comments and Treasury
announcement)
    By Karen Pierog
    CHICAGO, Nov 4 (Reuters) - Long-dated U.S. Treasury yields
fell from five-month highs on Wednesday after an unexpectedly
close U.S. election raised concerns over prolonged uncertainty
and the fate of further stimulus measures to revive the
pandemic-slammed economy.
    The race remained down to a handful of states, and both
Republican President Donald Trump and Democratic rival Joe Biden
had possible paths to reach the required 270 Electoral College
votes to win the White House.. 
    Treasury yields, which had climbed to multi-month highs
ahead of the election results, plummeted when chances for a
Democratic sweep that had been priced into the market faded.

    The benchmark 10-year yield, which hit a session
low of 0.756%, was last at 0.7696%, well below a five-month high
of 0.945% touched briefly overnight. 
    The 30-year yield, which traded as high as
1.757%, was last at 1.5477%, up from a session low of 1.506%.
    A combination of a Biden presidency and
Republican-controlled Senate "reduces the chances of fiscal
stimulus in the short term and an infrastructure spending
package in the intermediate term, both of which on the margin
reduce growth, inflation, and Treasury supply expectations,"
said Guy LeBas, chief fixed income strategist at Janney Capital
Management in Philadelphia.
    Meanwhile, the market mulled the possibility of a drawn-out
court battle over vote counting.
    "In that environment, I think you see sort of a drift lower
in rates and flatter in the curve," said Ben Jeffery, a
strategist at BMO Capital Markets in New York.
    Meanwhile, the U.S. Treasury said on Wednesday it will sell
$54 billion of three-year notes, $41 billion of 10-year notes
and $27 billion of 30-year bonds next week. 
    That followed Monday's announcement that it expects to
borrow $617 billion in the fourth quarter, assuming enactment of
an additional $1 trillion in spending.
    Republican U.S. Senate Majority Leader Mitch McConnell on
Wednesday called on Congress to approve a new coronavirus aid
bill by year end.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, was last at 62 basis points, falling from
a session high of 77 basis points, the widest spread since
mid-March. 
    November 4 Wednesday 12:06AM New York / 1806 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.0975       0.0989    0.003
 Six-month bills               0.105        0.1065    -0.006
 Two-year note                 99-246/256   0.1447    -0.023
 Three-year note               99-218/256   0.1756    -0.034
 Five-year note                99-162/256   0.3243    -0.067
 Seven-year note               99-160/256   0.5548    -0.095
 10-year note                  98-164/256   0.7696    -0.111
 20-year bond                  96-172/256   1.3167    -0.113
 30-year bond                  95-228/256   1.5477    -0.106
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50         1.25    
 spread                                               
 U.S. 3-year dollar swap         8.50         1.25    
 spread                                               
 U.S. 5-year dollar swap         6.50         1.00    
 spread                                               
 U.S. 10-year dollar swap        2.25         1.75    
 spread                                               
 U.S. 30-year dollar swap      -33.50         2.25    
 spread (Reporting by Karen Pierog in Chicago, additional reporting by
Dhara Ranasinghe in London and Stanley White in TOKYO; Editing
by Kirsten Donovan)
  
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