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TREASURIES-Stock plummet drives yields lower

 (Recasts with stock drop, updates yields, adds analyst
comments, non-manufacturing data, upcoming bond and note
auctions)
    By Karen Pierog
    CHICAGO, Sept 3 (Reuters) - U.S. Treasury yields fell on
Thursday as stocks plunged and the market awaited August
employment data due out on Friday for the latest indication of
how the coronavirus-hit economy is faring.
    The benchmark 10-year yield, which dropped to as
low as 0.604% earlier in the session, was last down 2.4 basis
points at 0.6266%.
    "Today is probably because of the reversal we're seeing in
stocks," said Subadra Rajappa, head of U.S. interest rate
strategy at Societe Generale in New York.
    Wall Street stock indexes dropped as investors shed
technology holdings amid concerns over the economic recovery.
 
    On Thursday's data front, the U.S. Labor Department reported
the number of Americans filing new claims for unemployment
benefits fell more than expected last week, but remained
extraordinarily high.
    The Institute for Supply Management (ISM) said U.S. services
industry growth slowed in August, likely as the boost from the
reopening of businesses and fiscal stimulus faded.
    "Data in general has been okay," Rajappa said. "After a
strong May and June, data is somewhat plateauing in July and
August." 
    Jon Hill, U.S. interest rate strategist at BMO Capital
Markets in New York, said it has been hard for the market to
trade on any data "with high confidence."
    "Because at the end of the day the two most important things
are what happens with the virus and soon to be, what's going on
with the (Nov. 3 U.S.) election," he said.
    Meanwhile, the U.S. Treasury announced it will sell $50
billion of three-year notes, $35 billion of 10-year notes, and
$23 billion of 30-year bonds next week.
     The two-year U.S. Treasury yield, which
typically moves in step with interest rate expectations, was
down 1 basis point at 0.127%.
    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 50 basis points, 1.4 basis
point lower than at Wednesday's close.
 September 3 Thursday 2:52PM New York / 1952 GMT
                               Price Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.1025       0.1042    -0.002
 Six-month bills               0.1175       0.1192    0.000
 Two-year note                 99-255/256   0.127     -0.010
 Three-year note               99-242/256   0.1436    -0.008
 Five-year note                100-12/256   0.2405    -0.016
 Seven-year note               100-124/256  0.4296    -0.022
 10-year note                  99-252/256   0.6266    -0.024
 20-year bond                  99-204/256   1.1364    -0.020
 30-year bond                  100-168/256  1.3483    -0.027
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.25         0.50    
 spread                                               
 U.S. 3-year dollar swap         8.25         0.00    
 spread                                               
 U.S. 5-year dollar swap         7.00         0.25    
 spread                                               
 U.S. 10-year dollar swap        1.25         0.00    
 spread                                               
 U.S. 30-year dollar swap      -36.00         0.25    
 spread (Reporting by Karen Pierog; Editing by Jonathan Oatis and
Andrea Ricci)
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