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TREASURIES-Yields higher after payroll losses less than expected

Ross Kerber

(Updates market activity, adds analyst comment) By Ross Kerber June 3 (Reuters) - U.S. Treasury yields rose on Wednesday while riskier assets gained favor after a report showed that U.S. private payrolls fell much less than expected in May as businesses reopened amid the coronavirus pandemic. The yield on the benchmark 10-year note was up 8.6 basis points at 0.7656% in afternoon trading, its highest level since April. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 56 basis points, about 4 basis points higher than Tuesday's close and its highest level since March. The trading showed investors growing hopeful the U.S. economy will recover sooner rather than later, said Stan Shipley, research analyst for Evercore ISI. "The market is saying the world isn't ending," he said, while also noting there were fewer reports of violence overnight in the widespread protests over the death of an unarmed black man at the hands of police. Employers laid off another 2.76 million workers in May, according to the ADP National Employment Report, well below economists' forecast of 9 million. But with the data so far off the estimate, said Jim Vogel, interest rate strategist for FHN Financial, it sent a murky message about the state of the economy. "People had written off May, but now we have to take a closer look at the baseline of what really happened," Vogel said. World shares hit three-month highs on Wednesday and the dollar fell for a sixth day running as easing lockdowns and hopes for more monetary stimulus gave investors confidence, despite rising COVID-19 tolls. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 3.2 basis points at 0.1998%. June 3 Wednesday 2:26PM New York / 1826 GMT Price US T BONDS SEP0 175-10/32 -2-1/32 10YR TNotes SEP0 138-40/256 -0-180/2 56 Price Current Net Yield % Change (bps) Three-month bills 0.1525 0.1547 0.003 Six-month bills 0.175 0.1781 0.000 Two-year note 99-218/256 0.1998 0.032 Three-year note 99-160/256 0.2529 0.043 Five-year note 99-94/256 0.3782 0.059 Seven-year note 99-92/256 0.5937 0.076 10-year note 98-168/256 0.7656 0.086 30-year bond 92-136/256 1.5633 0.084 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.25 -0.75 spread U.S. 3-year dollar swap 4.00 -1.25 spread U.S. 5-year dollar swap 3.50 -0.75 spread U.S. 10-year dollar swap -1.50 -0.25 spread U.S. 30-year dollar swap -48.75 0.50 spread (Reporting by Ross Kerber in Boston; Editing by Leslie Adler)