TREASURIES-Yields hit four-month highs on hopes for bigger stimulus package

(Adds quotes, updates prices) By Karen Brettell NEW YORK, Oct 21 (Reuters) - Benchmark U.S. Treasury yields rose to four-month highs on Wednesday on hopes that U.S. lawmakers will reach a deal to pass new fiscal stimulus in the near term, and before the Treasury Department will sell new 20-year debt. The White House and Democrats in the U.S. Congress moved closer to agreement on a new coronavirus relief package on Tuesday as President Donald Trump said he was willing to accept a large aid bill despite opposition from his own Republican Party. “Broadly speaking the rise in yields this week can be attributed to optimism on the stimulus package,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. “As time goes by it feels more and more likely it’s going to be a bigger package given that the Dems seem to be driving the discussion.” Some investors are betting that long-dated yields will rise after the Nov. 3 presidential if Democrats win a majority in the Senate and pass more stimulus than is expected from Republicans. But other Democrat policies are also viewed as potentially weighing on the economy. “The market is at an interesting juncture where not only are there differing views about what the most likely outcome is into and through the election, but also differing views on what the market reaction should be for the same outcome,” said Michael de Pass, global head of U.S. Treasury trading at Citadel Securities. “The broadly accepted narrative is that a Democratic sweep is going to be bearish for Treasuries, but now there are people interested in taking the other side of the argument, saying that the likely increase in regulation and taxation could be quite negative for economic growth, particularly if the fiscal stimulus is not as targeted,” de Pass said. Benchmark 10-year note yields were last up two basis points on the day at 0.814% after earlier reaching 0.836%, the highest since June 9. The yield curve between two-year and 10-year notes steepened as far as 68 basis points, the most since June 8. Yields on 20-year bonds rose two basis points to 1.380% before the Treasury Department will auction $22 billion of the debt later on Wednesday. The Treasury will also sell $17 billion in five-year Treasury Inflation-Protected Securities (TIPS) on Thursday. October 21 Wednesday 9:22 AM New York / 1322 GMT Price US T BONDS DEC0 173-4/32 -0-12/32 10YR TNotes DEC0 138-144/256 -0-36/25 6 Price Current Net Yield % Change (bps) Three-month bills 0.1 0.1014 0.000 Six-month bills 0.115 0.1167 0.000 Two-year note 99-243/256 0.1512 0.004 Three-year note 99-200/256 0.1986 0.006 Five-year note 99-124/256 0.3554 0.012 Seven-year note 98-152/256 0.582 0.016 10-year note 98-56/256 0.8142 0.017 20-year bond 95-152/256 1.3799 0.016 30-year bond 94-76/256 1.6168 0.014 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.25 -0.25 spread U.S. 3-year dollar swap 7.75 -0.25 spread U.S. 5-year dollar swap 7.25 -0.50 spread U.S. 10-year dollar swap 2.50 -0.25 spread U.S. 30-year dollar swap -35.50 0.00 spread