(Updates prices) By Karen Brettell NEW YORK, Dec 30 (Reuters) - U.S. Treasury yields rose on Monday and the U.S. two-year, 10-year yield curve was the steepest in 14 months as investors prepared for the end of the year. Benchmark 10-year yields held below recent highs of around 1.95%, after weakening this month on improving risk appetite after the United States and China agreed to the first phase of a trade deal. The yields were last at 1.90%. They have backed up from 1.69% at the beginning of December and are up from a three-year low of 1.43% reached on Sept. 3. Longer-dated notes underperformed shorter-dated debt, sending the closely watched two-year, 10-year yield curve to its steepest level since October 2018 at 34 basis points. A major factor behind the relative stability in shorter-dated notes is the Federal Reserve's daily operations to provide liquidity to the repurchase (repo) agreement market, where banks and investors borrow funds to finance asset purchases and other expenses. The liquidity has helped to stave off a scramble for funds over year-end, at least so far, which can send the cost of borrowing significantly higher. "That’s anchoring the short end of the curve," said Jim Vogel, an interest rate strategist at FHN Financial in Memphis, Tennessee. The yield curve inverted in August, a signal that a recession may be likely in the next one to two years. It has since steepened, however, on optimism the U.S. economy will not slow as much as expected and on expectations the Federal Reserve is unlikely to continue lowering its benchmark interest rate, after cutting it three times this year. Trading volumes were light before Wednesday’s New Year's Day holiday. December 30 Monday 2:46PM New York / 1946 GMT Price Current Net Yield % Change (bps) Three-month bills 1.5125 1.5433 -0.021 Six-month bills 1.5475 1.5854 0.002 Two-year note 100-25/256 1.5752 -0.014 Three-year note 100-18/256 1.6005 -0.003 Five-year note 100-80/256 1.6846 0.007 Seven-year note 99-152/256 1.812 0.014 10-year note 98-168/256 1.8998 0.027 30-year bond 100-140/256 2.3494 0.039 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 10.50 1.00 spread U.S. 3-year dollar swap 6.50 1.00 spread U.S. 5-year dollar swap 2.25 1.25 spread U.S. 10-year dollar swap -3.50 0.75 spread U.S. 30-year dollar swap -30.00 -0.25 spread (Reporting by Karen Brettell Editing by Chris Reese and Nick Zieminski)
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