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TREASURIES-U.S. yields little changed before 3-year note auction

* U.S. 3-year note supply seen sold at highest yield since 2010 U.S. yield curve hovers at flattest level in a decade

(Updates market action, adds quote) NEW YORK, Nov 7 (Reuters) - U.S. Treasury yields were little changed on Tuesday in advance of a $24 billion auction of three-year government debt, the first part of this week's $64 billion quarterly refunding whose proceeds will be used to repay $42.7 billion to bondholders. Steady yields kept the U.S. yield curve near its flattest level in a decade. Traders have favored longer-dated Treasuries over shorter-dated issues on expectations of further interest rate increases from the Federal Reserve and domestic inflation staying below the Fed's 2-percent target, analysts said. "Demand should be should be soft for the 3-year (Treasury supply) on Tuesday, but 'acceptable' for the 10- and 30-year auction," Evercore ISI strategist Stan Shipley wrote in a research note. Weak bidding for the latest three-year note supply, particularly from overseas investors, might force bond dealers to purchase more and resell them at a loss, analysts said. Dealers have bought more three-year notes at auction in September and October than their recent average, Treasury data showed. The Treasury Department will sell the three-year note issue at 1 p.m. (1800 GMT). It will auction $23 billion in 10-year debt on Wednesday and $15 billion in 30-year bonds on Thursday. In "when-issued" activity, traders expected the upcoming three-year note to fetch a yield of 1.749 percent, which would be its highest yield at an auction since April 2010, according to Tradeweb data. At 8:52 a.m. (1352 GMT), the benchmark 10-year Treasury yield was 2.320 percent, unchanged from late Monday when it hit a two-week low. The 30-year yield was 2.793 percent, flat on the day, after touching its lowest level since late September on Monday. The two-year yield was a tad higher at 1.625 percent, leaving its spread against 10-year yield just below 70 basis points, which was a level last seen in November 2007, Reuters data showed.

November 7 Tuesday 8:52AM New York / 1352 GMT Price

US T BONDS DEC7 154-10/32 0-3/32 10YR TNotes DEC7 125-88/256 -0-4/256 Price Current Net Yield % Change

(bps)

Three-month bills 1.1975 1.2179 0.005 Six-month bills 1.31 1.337 0.008 Two-year note 99-194/256 1.6249 0.004 Three-year note 99-180/256 1.7291 0.000 Five-year note 100-16/256 1.9867 0.000 Seven-year note 100-124/256 2.1748 0.000 10-year note 99-100/256 2.3199 0.000 30-year bond 99-32/256 2.7934 -0.003 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 69.30 0.20 30-year vs 5-year yield 80.50 -0.40

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 20.75 0.25

spread

U.S. 3-year dollar swap 20.25 0.00

spread

U.S. 5-year dollar swap 7.25 0.00

spread

U.S. 10-year dollar swap -3.00 -0.25

spread

U.S. 30-year dollar swap -27.00 0.25

spread

(Reporting by Richard Leong; Editing by Andrea Ricci)