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(Recasts, updates yields, adds TIPS auction results, upcoming note auctions, analyst comments) Jan 21 (Reuters) - U.S. Treasury yields on the longer end of the curve climbed along with inflation expectations on Thursday as the market eyed the prospect for additional debt supply under U.S. President Joe Biden's administration. The benchmark 10-year yield was last up 1.6 basis points at 1.1058%. A closely watched part of the yield curve measuring the gap between yields on two- and 10-year Treasury notes steepened and was last 3.3 basis points higher at 97.91 basis points. Gennadiy Goldberg, interest rate strategist at TD Securities in New York, said the steeper yield curve signaled the potential for additional Treasury debt to fund more fiscal stimulus under Biden, who last week proposed a $1.9 trillion plan to aid the coronavirus-battered economy. "That's really driving the market here," he said. "So just kind of the worries that we're going to get a lot more supply." Record-large debt sales are already on tap for next week, with the U.S. Treasury on Thursday announcing auctions for $60 billion of two-year notes, $61 billion of five-year notes, and $62 billion of seven-year notes. The inflation breakeven rate for 10-year Treasury Inflation-Protected Securities (TIPS) rose to a session high of 2.171% following Thursday's auction of $15 billion of 10-year TIPS. The breakeven rate has been climbing to the highest levels since 2018 and is indicating the market expects inflation to average more than 2% a year for the next decade, well above the current rate and the Federal Reserve's 2% target. Goldberg said the run-up in the breakeven rate "is starting to get a little overdone." "It's going to take us a while to get back to levels where inflation can really start to move notably higher," he said. Analysts cited strong demand for the 10-year TIPS, which sold at a high yield of -0.987% with a bid-to-cover ratio of 2.68 times. Adding to the rise in yields was data showing initial claims for state unemployment benefits of a seasonally adjusted 900,000 for the week ended Jan. 16, compared to 926,000 in the prior week, according to the Labor Department. Economists polled by Reuters had forecast 910,000 applications in the latest week. Having flat or slightly improved data for the second week of January "helps argue that the trend is not towards rising claims," said Guy LeBas, chief fixed income strategist at Janney Capital Management in Philadelphia. "There was a substantial contingent in the macro-fundamental camp that was concerned about further deterioration in the U.S. labor markets and at least the numbers from today suggest it's not happening, at least not right now," he said. 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 0.125%. January 21 Thursday 3:34PM New York / 2134 GMT Price Current Net Yield % Change (bps) Three-month bills 0.08 0.0811 0.000 Six-month bills 0.09 0.0913 0.000 Two-year note 100 0.125 -0.006 Three-year note 99-206/256 0.1907 -0.005 Five-year note 99-168/256 0.4454 -0.004 Seven-year note 98-244/256 0.7803 0.007 10-year note 97-220/256 1.1058 0.016 20-year bond 94-248/256 1.6744 0.029 30-year bond 94-112/256 1.8692 0.027 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.50 0.00 spread U.S. 3-year dollar swap 7.75 0.50 spread U.S. 5-year dollar swap 8.25 0.75 spread U.S. 10-year dollar swap 1.00 1.00 spread U.S. 30-year dollar swap -26.00 0.25 spread (Reporting by Herbert Lash in New York and Karen Pierog in Chicago; editing by Chizu Nomiyama and Richard Chang)