TREASURIES-Longer-term yields move higher, yield curve steepens

By Karen Pierog CHICAGO, Dec 2 (Reuters) - U.S. Treasury yields on the long end of the curve rose on Wednesday, adding to Tuesday's big climb as the market continued to mull the possibility the Federal Reserve could start purchasing more longer-term debt to ensure rates stay low. The benchmark 10-year yield was last up 1.8 basis points at 0.9525% and the yield curve steepened. A push in the U.S. Congress for a new stimulus package to combat the economic fallout from the coronavirus pandemic sparked a sell off in Treasuries that sent yields soaring on Tuesday. "I think just momentum has yields continuing higher," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco, pointing to positive developments on the coronavirus vaccine front. She said the 10-year yield could eventually break 1%, while the 30-year yield could hit 1.75%. "I suspect the realization that the Fed is definitely in play will bring buyers in at those levels," she said, adding that it was still unclear whether the Fed, which meets later this month, will actually adopt a plan to buy more long-term Treasuries. "They don't want yields to rise and maybe crimp the recovery. So we could see some of the more dovish participants argue for duration extension in QE (quantitative easing)," Rupert said. On the data front, the ADP National Employment Report showed U.S. private payrolls increased by a less-than-expected 307,000 in November. It comes ahead of Friday's release of the government's monthly employment report. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was last down less than a basis point at 0.1682%. 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 last at 78 points, 2.20 basis points higher than Tuesday's close. December 2 Wednesday 9:50AM New York / 1550 GMT Price Current Net Yield % Change (bps) Three-month bills 0.085 0.0862 0.000 Six-month bills 0.09 0.0913 -0.008 Two-year note 99-234/256 0.1682 -0.006 Three-year note 100-20/256 0.2234 -0.003 Five-year note 99-186/256 0.4304 0.003 Seven-year note 99-116/256 0.7053 0.011 10-year note 99-68/256 0.9525 0.018 20-year bond 97-248/256 1.4931 0.025 30-year bond 98-64/256 1.6998 0.024 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.25 0.50 spread U.S. 3-year dollar swap 6.50 0.50 spread U.S. 5-year dollar swap 4.50 0.75 spread U.S. 10-year dollar swap -1.00 0.50 spread U.S. 30-year dollar swap -30.75 1.00 spread (By Karen Pierog)