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TREASURIES-Longer-term yields fall as August jobs report looms

 (Recasts, updates yields, adds analyst's and Fed official's
comments)
    By Karen Pierog
    CHICAGO, Sept 2 (Reuters) - Longer-term U.S. Treasury yields
tumbled on Wednesday, flattening the yield curve, as the market
awaited the release of August employment data later this week. 
    The benchmark 10-year yield was last down 1.8
basis points at 0.6526%, while the 30-yield fell 4.8
basis points to 1.3763%.
    Ellis Phifer, fixed income market strategist at Raymond
James in Memphis, Tennessee, said Wednesday's ADP National
Employment report may have sparked some portfolio shifting ahead
of Friday's U.S. Labor Department data even though the two have
varied greatly in recent months.
    "It probably put a little bit of fear in the bond market
that maybe this number is not going to be good and that's
another way to position and if you were thinking about
positioning anyway, here's a chance to go ahead and stake a
bet," he said. 
    ADP reported private payrolls rose by 428,000 jobs last
month. Data for July was revised upward to show hiring gaining
212,000 jobs instead of the initially reported 167,000.
Economists polled by Reuters had forecast private payrolls would
increase by 950,000 in August.
    Collin Martin, fixed income strategist at the Schwab Center
for Financial Research in New York, said Treasuries are facing
competing forces of "decent" economic data and Federal Reserve
officials calling for more monetary stimulus measures, which, in
the case of comments by Fed Governor Lael Brainard on Tuesday,
prompted yields to fall. 
    "The market is being pulled in a lot of different
directions," Martin said.
    On Wednesday, Cleveland Fed Bank President Loretta Mester
said the U.S. central bank needs to keep monetary policy
accommodative for a while to support the struggling
coronavirus-hit economy.
    Meanwhile, the market was also keeping an eye on
developments regarding the next round of coronavirus aid after
negotiations broke off in early August. White House Chief of
Staff Mark Meadows said on Tuesday that Republicans in the
Senate were likely next week to take up a COVID-19 relief bill.
 But "serious differences" remain between Democrats
and the White House, according to U.S. House Speaker Nancy
Pelosi. 
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, which is viewed as an indicator of
economic expectations, was last at 51.40 basis points, about 2
basis points lower than at Tuesday's close.
    
 September 2 Wednesday 2:53PM New York / 1953 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.105        0.1068    0.001
 Six-month bills               0.1175       0.1192    0.002
 Two-year note                 99-250/256   0.1368    0.004
 Three-year note               99-236/256   0.1516    0.006
 Five-year note                99-246/256   0.2579    0.003
 Seven-year note               100-80/256   0.4545    -0.009
 10-year note                  99-188/256   0.6526    -0.018
 20-year bond                  99-112/256   1.1566    -0.040
 30-year bond                  99-248/256   1.3763    -0.048
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.00         0.50    
 spread                                               
 U.S. 3-year dollar swap         8.50         0.25    
 spread                                               
 U.S. 5-year dollar swap         6.75         0.25    
 spread                                               
 U.S. 10-year dollar swap        1.25         0.75    
 spread                                               
 U.S. 30-year dollar swap      -36.25         1.25    
 spread (Reporting by Karen Pierog; editing by Jonathan Oatis)
  
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