(Corrects day of the week in first paragraph to Tuesday, corrects typo in third paragraph) By Karen Brettell NEW YORK, Nov 17 (Reuters) - U.S. Treasury yields fell on Tuesday as data showed that U.S. retail sales increased less than expected in October, underscoring expectations that growth may slow this quarter. Retail sales rose 0.3% last month, below economists’ expectations of 0.5%. Spending has been restrained by spiraling new 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, which will weigh in the economy in the interim. Benchmark 10-year yields fell three basis points to 0.877%, after reaching 0.975% last week. The yield curve between two-year and 10-year notes flattened three basis points to 70 basis points. The Federal Reserve is expected to shift more of its bond purchases to longer-dated debt if it views yields as rising too far and investors will be looking for any signs that this may be forthcoming when Federal Reserve Chair Jerome Powell speaks on Tuesday at a Bay Area Council Business Hall of Fame awards event. Fed Vice Chair Richard Clarida on Monday appeared to downplay speculation that the Fed to change its $120 billion program of monthly bond purchases as soon as December to better nurse the economy along. 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 9:34AM New York / 1434 GMT Price US T BONDS DEC0 172-18/32 0-21/32 10YR TNotes DEC0 138-60/256 0-52/256 Price Current Net Yield % Change (bps) Three-month bills 0.085 0.0862 -0.003 Six-month bills 0.0975 0.0989 -0.002 Two-year note 99-231/256 0.1752 -0.004 Three-year note 100-16/256 0.229 -0.005 Five-year note 99-80/256 0.3904 -0.018 Seven-year note 99-20/256 0.6358 -0.023 10-year note 99-252/256 0.8766 -0.029 20-year bond 95-72/256 1.3994 -0.031 30-year bond 99-228/256 1.6296 -0.029 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 7.50 -0.25 spread U.S. 5-year dollar swap 6.00 -0.25 spread U.S. 10-year dollar swap -0.75 -0.50 spread U.S. 30-year dollar swap -33.25 -0.50 spread (Editing by Nick Zieminski)
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