(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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