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TREASURIES-U.S. government debt yields flat before 10-year auction

* U.S. to sell $23 bln in 10-year notes at 1800 GMT

* U.S. yield curve near flattest level in a decade

NEW YORK, Nov 8 (Reuters) - U.S. Treasury yields edged higher on Wednesday with the yield curve close to its flattest level in a decade, in advance of a $23 billion auction of 10-year government securities, the second part of the $64 billion quarterly refunding this week. Over the past week and a half, traders have piled into longer-dated Treasuries and reduced holdings in shorter-dated issues as they brace for more interest rate increases from the Federal Reserve while expecting domestic inflation to hold below the Fed's 2-percent target, analysts said. Uncertainty about whether Republicans in U.S. Congress will pass tax cuts and other changes to federal tax code have made such "curve-flattener" trades more appealing, they said, as have diminished chances the government will introduce a Treasury bond that matures beyond 30 years. Growing demand for longer-dated Treasuries has raised concerns that the upcoming 10-year and 30-year supply may become expensive. Nomura Securities International strategists described the dramatic narrowing of yields as "power flattening." "The power flattening of the yield curve is richening long end both outright and on the curve," they wrote in a research note. "After an average three-year auction, we are cautious into the 10-year supply." In "when-issue" activity, traders expected the 10-year sale at 1 p.m. (1800 GMT) to fetch a yield of 2.300 percent , compared with 2.346 percent at the previous 10-year auction in October, according to Tradeweb data. At 9:00 a.m. (1400 GMT), the 10-year Treasury note yield was marginally higher at 2.313 percent on the open market, while the 30-year bond yield was up half a basis point at 2.775 percent. The two-year yield rose nearly 1 basis point to 1.637 percent. The yield spread between two-year and 10-year Treasuries was 67.2 basis points. Earlier in the session it contracted to 66.7 basis points, the tightest since November 2007, Reuters data showed. November 8 Wednesday 9:00AM New York / 1400 GMT Price

US T BONDS DEC7 154-18/32 -0-4/32 10YR TNotes DEC7 125-100/256 -0-8/256 Price Current Net Yield % Change

(bps)

Three-month bills 1.1975 1.2178 0.000 Six-month bills 1.3075 1.3345 0.002 Two-year note 99-188/256 1.6371 0.008 Three-year note 99-252/256 1.7554 0.000 Five-year note 100-16/256 1.9867 0.004 Seven-year note 100-128/256 2.1723 0.004 10-year note 99-116/256 2.3127 0.006 30-year bond 99-124/256 2.7754 0.005 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 67.40 -0.70 30-year vs 5-year yield 78.80 0.00

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 20.00 -0.50

spread

U.S. 3-year dollar swap 18.00 -2.25

spread

U.S. 5-year dollar swap 7.25 0.00

spread

U.S. 10-year dollar swap -2.75 -0.25

spread

U.S. 30-year dollar swap -26.25 0.00

spread

(Reporting by Richard Leong; Editing by David Gregorio)