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TREASURIES-Yields fall after wages data for October disappoints

* Average hourly earnings dipped in October

* Treasury yield curve flattest since late 2007

NEW YORK, Nov 3 (Reuters) - U.S. Treasury yields fell to two-week lows on Friday after the governments jobs report for October showed that wages did not pick up in the month, raising concerns about continuing low inflation. U.S. job growth accelerated in October after hurricane-related disruptions hurt employment in September, but there were signs that labor market momentum was slowing as annual wage gains sharply retreated. Nonfarm payrolls increased by 261,000 jobs last month. But the return of workers in such lower-paying industries as leisure and hospitality after the hurricanes held back wage growth. Average hourly earnings slipped by one cent, leaving them unchanged in percentage terms. The number overall was good, but I think the markets are focused on the rate side on the miss in the average hourly earnings. Thats a good indication of recent wage pressures and were just not seeing that, said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.

Benchmark 10-year notes were last up 3/32 in

price on the day to yield 2.338 percent, after falling as low as 2.323 percent on the data. Bonds rallied this week on expectations that President Donald Trump would nominate Federal Reserve Governor Jerome Powell to head the Federal Reserve, as he did on Thursday. Powell, who already sits on the U.S. central bank's board, is seen as someone who will stick with the monetary policy stance favored by current Chair Janet Yellen, whose term expires in early February. The Treasury yield curve also flattened after the Treasury Department said on Wednesday it would keep auction sizes steady in the coming months, despite the Fed's plan to reduce its bond holdings. The Treasury Borrowing Advisory Committee, which advises the government on funding strategy, said Treasury bills and two-, three- and five-year notes could be appropriate maturities for increased issuance. Some investors had expected that the Treasury would focus on increasing longer-dated debt maturities. The yield curve between two-year notes and 10-year notes flattened to 72 basis points on Friday, the narrowest since late 2007.

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