(Recasts with Fed governor comments, updates yields and analyst comments) By Karen Pierog CHICAGO, Sept 1 (Reuters) - U.S. Treasury yields on the longer end of the curve reversed course and fell on Tuesday after a Federal Reserve governor called for new accommodative efforts to help the economy overcome the impact of the coronavirus pandemic. The benchmark 10-year yield was last down 1.6 basis points at 0.677%. With the U.S. central bank last week announcing a new policy framework aimed at achieving maximum employment and 2% average inflation over time, Fed Governor Lael Brainard on Tuesday tied that approach to the need for more monetary stimulus, likely in the form of more aggressive bond buying. "It was the comment on monetary policy that gave a boost here," said Kim Rupert, senior economist at Action Economics in San Francisco, adding that it could mean more quantitative easing in different parts of the yield curve. Earlier on Tuesday, yields rose after the Institute for Supply Management (ISM) said its index of national factory activity increased to a reading of 56.0 last month from 54.2 in July. That was the highest level since November 2018 and marked three straight months of growth. It followed data out of China and Europe that showed an uptick in manufacturing last month. Looming large this week is Friday's release of August employment data, which could shed light on the pace of the economic recovery. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was last unchanged at 0.1309%. 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 54.40 basis points, about 2.8 basis points lower than at Monday's close. September 1 Tuesday 2:41PM New York / 1941 GMT Price Current Net Yield % Change (bps) Three-month bills 0.105 0.1068 -0.005 Six-month bills 0.115 0.1167 -0.002 Two-year note 99-253/256 0.1309 0.000 Three-year note 99-240/256 0.1462 0.000 Five-year note 99-248/256 0.2563 -0.007 Seven-year note 100-56/256 0.4682 -0.014 10-year note 99-128/256 0.677 -0.016 20-year bond 98-144/256 1.2063 -0.022 30-year bond 98-156/256 1.4323 -0.020 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.75 0.25 spread U.S. 3-year dollar swap 8.25 -0.25 spread U.S. 5-year dollar swap 6.50 0.00 spread U.S. 10-year dollar swap 0.50 0.25 spread U.S. 30-year dollar swap -37.75 0.50 spread (Reporting by Karen Pierog Editing by Chizu Nomiyama and Tom Brown)
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