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TREASURIES-Longer-term yields fall on call for more Fed accommodation

 (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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