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TREASURIES-Yields lower on stimulus deal doubts, more infections

 (Updates with market activity, auction results)
    By Ross Kerber
    Oct 27 (Reuters) - U.S. Treasury yields fell on Tuesday and
the yield curve was flatter as hopes faded for an imminent
stimulus deal in Washington, while coronavirus infections
surged.
    The benchmark 10-year yield was down 2.7 basis
points in afternoon trading at 0.776%.
    President Donald Trump acknowledged that a coronavirus
economic relief deal would likely come after the Nov. 3
election, with the White House unable to bridge differences with
fellow Republicans in the U.S. Senate as well as congressional
Democrats.
    Major U.S. stock indexes extended declines from Monday as
investors parsed through corporate earnings, took stock of
rising coronavirus cases, and braced for volatility.

    Treasury yields started falling early Tuesday as equity
prices rose, a trend that usually prompts a shift out of
safe-haven government bonds.
    But policy factors seemed to play a bigger role, said Eric
Jussaume, director of fixed income for Cambridge Trust. "The
market wants some sort of stimulus. It's not getting it yet."
    The U.S Treasury sold $54 billion worth of 2-year notes in
an auction whose results essentially matched market demand. Bids
from primary dealers accounted for 32% of accepted bids,
compared to 31.9% on average, according to a note from Ben
Jeffery of BMO Capital Markets.
    A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at 63 basis points, about 3 basis points lower
than Monday's close and its lowest since Oct. 20.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was unchanged at
0.1494% in afternoon trading.
      October 27 Tuesday 2:41PM New York / 1841 GMT Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0966    -0.002
 Six-month bills               0.105        0.1065    -0.006
 Two-year note                 99-244/256   0.1494    0.000
 Three-year note               99-210/256   0.1858    -0.005
 Five-year note                99-152/256   0.3333    -0.016
 Seven-year note               98-208/256   0.55      -0.023
 10-year note                  98-148/256   0.776     -0.027
 20-year bond                  96-112/256   1.3302    -0.030
 30-year bond                  95-120/256   1.5658    -0.028
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         8.50         0.00    
 spread                                               
 U.S. 3-year dollar swap         8.00         0.25    
 spread                                               
 U.S. 5-year dollar swap         6.75         0.00    
 spread                                               
 U.S. 10-year dollar swap        2.50         0.00    
 spread                                               
 U.S. 30-year dollar swap      -34.25        -0.25    
 spread (Reporting by Ross Kerber in Boston
Editing by Nick Zieminski, Jonathan Oatis and Richard Chang)
  
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