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TREASURIES-U.S. yields inch higher in choppy trading as markets consolidate

    * U.S. 10-year note auction shows softer underlying metrics
    * U.S. yield curve steeper, spread widest in more than 2
years
    * Markets starting to re-price for higher U.S. yields

 (Adds new comment, U.S. 10-year auction results, updates
prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 10 (Reuters) - U.S. Treasury yields were flat
to slightly higher on Tuesday, as the market consolidated the
previous session's strong gains fueled by news of a potential
coronavirus vaccine.
    For some analysts, the yield trend seems to have turned
higher on the vaccine news and growing optimism about a stable
U.S. recovery.
    The U.S yield curve steepened again on Tuesday, with the
spread between two-year and 10-year notes rising as high as 78.5
basis points, the widest since February 2018.
    On Monday, Pfizer Inc said its experimental vaccine
was more than 90% effective in preventing COVID-19 based on
initial data from a large study. Ten- and 30-year yields hit
eight-month highs on Monday, while two-year and 20-year yields
climbed to five-month peaks.
    "There's a lot of positivity that should push yields higher.
But is it too soon to judge this trend, as the vaccine is likely
not available to most people until the middle of next year?"
said Patrick Leary, chief market strategist and senior trader at
broker-dealer Incapital.
    "Long term, the trend should continue for higher yields. But
if we see 1.25% in the 10-year and we're still in this same
wait-and-see mode and the economy is still sputtering dealing
with COVID, you'll see the Federal Reserve talk yields lower, if
not shift their purchases out the curve more," he added.
    Politics has taken a back seat in terms of the market's
focus, with Democrat Joe Biden on Saturday securing the more
than the 270 votes in the Electoral College needed to become
U.S. president.
    Moody's Investors Service, in a note on Tuesday, warned
however, that ongoing legal challenges to Biden's projected
victory by Republican incumbent Donald Trump could unsettle
markets and stir social tensions, which could have a material
impact on the U.S. recovery.
    In early afternoon trading, U.S. 10-year Treasury yields
edged up to 0.961% from 0.958% late on Monday. They
hit 0.975% on Monday, the highest since March.
    U.S. 30-year yields were little changed at 1.75%
, from Monday's 1.751%. They touched 1.767% on
Monday, the highest level since March.
    On the front end of the curve, U.S. two-year yields were at
0.18%, from 0.183% on Monday, hitting their strongest
level since June of 0.189% on Monday as well.
    Demand was lackluster for the Treasury's auction of $41 bln
in 10-year notes on Tuesday.
    The high yield of 0.96% was in line with market
expectations. The bid-to-cover ratio, a gauge of demand, was a
tad softer at 2.32, compared with an average of 2.42. Indirect
bidders, which include foreign central banks, took 54.8% of the
total, compared with an average of 61.1%.
    
      November 10 Tuesday 1:31PM New York / 1831 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0963    -0.005
 Six-month bills               0.1025       0.104     -0.008
 Two-year note                 99-228/256   0.1807    -0.002
 Three-year note               100          0.25      -0.003
 Five-year note                99-2/256     0.4522    0.005
 Seven-year note               98-138/256   0.7153    0.006
 10-year note                  96-220/256   0.963     0.005
 20-year bond                  93-56/256    1.5237    0.004
 30-year bond                  91-72/256    1.7522    0.001
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         7.75         0.50    
 spread                                               
 U.S. 3-year dollar swap         6.25        -0.25    
 spread                                               
 U.S. 5-year dollar swap         5.25         0.00    
 spread                                               
 U.S. 10-year dollar swap        0.75        -0.25    
 spread                                               
 U.S. 30-year dollar swap      -34.50        -0.25    
 spread (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Ross Kerber in Boston; Editing by Nick Zieminski and Richard
Chang)
  
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