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TREASURIES-U.S. long-dated yields climb to five-week peaks on stimulus hopes

    * Pelosi, Mnuchin to continue stimulus talks on Tuesday
    * Trump to leave hospital on Monday after COVID diagnosis
    * U.S. 10, 20, 30-year yields hit five-week high
    * U.S yield curve steepens, spread widest since late August 

 (Adds new comment, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 5 (Reuters) - U.S. Treasury yields rose on
Monday, as expectations grew that a stimulus package to combat
the economic devastation caused by  the pandemic could be
completed before the November presidential election.
    Higher-than-expected U.S services sector data also helped
boost yields, as did indications that President Donald Trump
will leave the hospital on Monday after he tested positive for
COVID last Friday.
    U.S. 10-year, 20-year, and 30-year yields rose to five-week
highs, while the yield curve steepened to its widest since late
August.
    In line with the rise in yields, shares on Wall Street were
higher on the day, while the safe-haven dollar and yen were
weakened, as investors eyed the prospects for the U.S. stimulus
deal.
    U.S. House Speaker Nancy Pelosi and Treasury Secretary
Steven Mnuchin spoke by phone for about an hour on Monday on
coronavirus economic relief and were preparing to talk again
Tuesday, continuing their recent flurry of activity working
towards a deal on legislation.
    White House Chief of Staff Mark Meadows said on Monday there
is still potential to reach agreement with U.S. lawmakers on
more economic relief during the coronavirus pandemic, and Trump
is committed to getting the deal done.
    "It looks like they're making progress on stimulus talks,"
said Stan Shipley, fixed-income strategist, at Evercore ISI in
New York. "It's fifty-fifty whether they can pass it before the
election, but if they don't make it before, they're doing it
after the election. So it's coming."
    In addition, Trump said on Twitter he will leave the U.S.
military hospital later on Monday, adding that he felt "really
good." Some analysts said that helped sentiment a
bit.
    In afternoon trading, U.S. 10-year yields rose
to 0.761%, from 0.694% late on Friday, after earlier rising to
0.762%, the highest level since late August. 
    Yields also held gains after data showed U.S. services
activity picked up in September, pulling above a level that
prevailed before the COVID-19 pandemic struck the nation, amid
increases in new orders and employment. The Institute for Supply
Management (ISM) said its non-manufacturing activity index rose
to 57.8 last month from 56.9 in August. That put the index just
above its 57.3 level in February.
    "I think the economic data, even with the disappointing
payrolls last Friday is coming in pretty good here," said
Evercore's Shipley. 
    "Inflation expectations are climbing. We're getting a lot
more growth than people expect and higher inflation," he added.
    Yields on U.S. 30-year bonds were at 1.567%, up
from 1.48% on Friday.  Earlier, 30-year yields climbed to a
five-week peak of 1.569%. 
    On the short end of the curve, U.S. 2-year yields rose to
0.146%, from 0.133%.
    The yield curve steepened on Monday as well, with the spread
between the 10-year and two-year widening to as much as 61.7
basis points, the widest spread in five weeks.
    
      October 5 Monday 3:12PM New York / 1912 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0966    0.006
 Six-month bills               0.105        0.1065    0.005
 Two-year note                 99-245/256   0.1467    0.014
 Three-year note               99-210/256   0.1863    0.021
 Five-year note                99-160/256   0.3259    0.041
 Seven-year note               98-224/256   0.5394    0.059
 10-year note                  98-176/256   0.7634    0.069
 20-year bond                  96-100/256   1.3324    0.085
 30-year bond                  95-112/256   1.5669    0.087
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.00        -0.75    
 spread                                               
 U.S. 3-year dollar swap         7.50        -0.50    
 spread                                               
 U.S. 5-year dollar swap         6.50        -0.25    
 spread                                               
 U.S. 10-year dollar swap        1.50        -0.50    
 spread                                               
 U.S. 30-year dollar swap      -37.50        -1.25    
 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve
Orlofsky and Chizu Nomiyama)
  
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