(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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