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TREASURIES-U.S. yields slide on stimulus uncertainty, weak data

    * Trump says COVID-19 aid talks have resumed
    * Pelosi says no airline deal without broad COVID bill
    * U.S. jobless claims weaker than expected
    * U.S. 30-year bond auction outcome on the weak side

 (Adds new comment, Pelosi remarks on stimulus, 30-year bond
auction results, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Oct 8 (Reuters) - U.S. Treasury yields retreated
on Thursday, with long-dated debt falling from four-month peaks
hit earlier this week, amid persistent uncertainty about the
stimulus talks on coronavirus aid as well as
weaker-than-expected jobless claims data.
    With yields down for the day, the curve flattened a bit,
with the spread between the two-year and 10-year yields at 61.6
basis points. Since late July, though, the curve
has steepened by around 30 basis points.
    U.S. yields, however, inched higher after a soft 30-year
bond auction. The high yield for the auction was 1.578%, higher
than what market expected at the bid deadline. The bid-to-cover
ratio, a measure of demand, was at 2.29, slightly lower than
2.31 last month.
    Markets, though, were focused on U.S. stimulus discussions.
    Two days after calling off U.S. stimulus negotiations,
President Donald Trump, in an interview with Fox Business
Network, said talks with Congress have re-started over further
COVID-19 relief and that there was a good chance a deal could be
reached. He gave no other details about a possible agreement.

    Treasury yields inched higher after Trump's comments, but
came back down.
    U.S. House Speaker Nancy Pelosi on Thursday said there would
be no additional federal aid for U.S. airlines without a more
comprehensive COVID-19 relief package, adding that she was
hopeful for a larger deal "because it has to be done."

    Trump had pushed late on Tuesday for a targeted aid package
for airlines, individuals, and small businesses.
    "We are trading on stimulus discussions right now," said Jim
Vogel, senior rates strategist, at FHN Financial in Memphis,
Tennessee. "They move the market quickly, but with no staying
power behind the moves."
    He added that there is very little "immediate, or near-term
economic consequences" of whether another stimulus package is
approved or not. "That's true even for industries with the most
difficult stretches such as airlines."
    In early afternoon trading, U.S. 10-year yields
fell to 0.766%, from 0.785% late on Wednesday. Ten-year yields
rose to their highest level since June on Wednesday.
    U.S. 10-year yields further slipped after data showed
jobless claims totaled 840,000 for the week ended Oct. 3,
compared with an upwardly revised 849,000 in the prior week.

    Yields on U.S. 30-year bonds were at 1.565%,
down from 1.589% the previous session. On Tuesday, 30-year
yields climbed to a four-month peak.
    On the short end of the curve, U.S. two-year yields slipped
to 0.148%, from Wednesday's 0.157%.
    The spread between five-year and 30-year yields also shrank
to 123.50 basis points.
    With the auctions out of the way, market participants are
looking to see whether the yield curve's steepening trend will
continue.
    Rob Robis, chief global fixed income strategist at BCA
Research in New York, said a steeper curve typically occurs when
there is Treasury issuance. "The primary dealers want to create
demand so they kind of lower the price range and so the bonds
can be auctioned successfully."
    "If we get through supply and the curve is still steep,
there's something more going on than just supply."
    
      October 8 Thursday 1:52PM New York / 1752 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0963    -0.003
 Six-month bills               0.11         0.1116    0.000
 Two-year note                 99-244/256   0.1488    -0.008
 Three-year note               99-204/256   0.1929    -0.010
 Five-year note                99-158/256   0.3276    -0.017
 Seven-year note               98-224/256   0.5396    -0.018
 10-year note                  98-168/256   0.7669    -0.018
 20-year bond                  96-120/256   1.3279    -0.026
 30-year bond                  95-128/256   1.5642    -0.025
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50         0.25    
 spread                                               
 U.S. 3-year dollar swap         7.75         0.50    
 spread                                               
 U.S. 5-year dollar swap         7.75         0.75    
 spread                                               
 U.S. 10-year dollar swap        2.75         0.50    
 spread                                               
 U.S. 30-year dollar swap      -35.50         1.00    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Nick Zieminski)
  
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