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TREASURIES-Yields hit multi-month highs ahead of U.S. election results

 (Updates yields, adds analyst comments, changes dateline,
previous CHICAGO/LONDON)
    CHICAGO, Nov 3 (Reuters) - U.S. Treasury yields marched
higher and the yield curve steepened on Tuesday as the market
awaited results from the national election.
    Americans headed to the polls to decide whether incumbent
Republican President Donald Trump or his Democratic challenger
Joe Biden will be elected president.
    The benchmark 10-year yield, which earlier rose
to 0.898%, its highest level since June, was last up 3.8 basis
points at 0.8857%.
    Yields on two-, three-, five- and seven-year notes also
reached multi-month highs during the session.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, steepened to 72.40 basis points, its
highest level since mid-March. The spread was last at 71.80
basis points, 3.1 basis points higher from Monday's close.
     Bill Merz, head of fixed income research at U.S. Bank
Wealth Management in Minneapolis, pointed to the potential for
"a significant amount of volatility" in the market as some
traders have positioned for Democrats to win the White House and
control of Congress in the election. 
    "In that scenario of a blue sweep, there is an expectation
of a larger fiscal package and that would indicate additional
supply as well as boost the prospects for reflationary pressures
to reemerge," he said.
    Still, Merz noted the 10-year yield remained rangebound and
that the U.S. Federal Reserve, which meets on Wednesday and
Thursday, could discuss shifting its Treasury purchases to the
long end of curve to prevent those yields from climbing too
high.
    Tony Rodriguez, head of fixed income strategy at Nuveen,
said the market was also watching for Wednesday's quarterly
refunding details from the U.S. Treasury, which announced on
Monday it expects to borrow $617 billion in the fourth quarter.

    "There's going to be a lot of supply the market's going to
have to digest," he said.
    He added that factors involving the economy were also
fueling uncertainty in the market with the October employment
report due out on Friday and coronavirus cases on the rise.

    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was last up 1
basis point at 0.1683%.
    Nov. 3, Tuesday 3:30 p.m. EST/2030 GMT
                               Price                  
 US T BONDS DEC0               172-1/32     -0-23/32  
 10YR TNotes DEC0              138-20/256   -0-56/25  
                                            6         
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0963    0.000
 Six-month bills               0.11         0.1116    0.000
 Two-year note                 99-234/256   0.1683    0.010
 Three-year note               99-192/256   0.2102    0.013
 Five-year note                99-74/256    0.394     0.019
 Seven-year note               98-244/256   0.6535    0.028
 10-year note                  97-144/256   0.8857    0.038
 20-year bond                  94-192/256   1.4307    0.039
 30-year bond                  93-108/256   1.6557    0.033
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.50        -0.25    
 spread                                               
 U.S. 3-year dollar swap         7.50        -0.25    
 spread                                               
 U.S. 5-year dollar swap         5.50         0.00    
 spread                                               
 U.S. 10-year dollar swap        0.50        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -35.50         0.75    
 spread (By Karen Pierog in Chicago, additional reporting by Dhara
Ranasinghe in London; Editing by Bernadette Baum and Marguerita
Choy)
  
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