CHICAGO/LONDON, Nov 3 (Reuters) - U.S. Treasury yields marched higher on Tuesday as the market braced for potential volatility on Election Day due to uncertainty over the results. Americans headed to the polls to decide whether incumbent Republican President Donald Trump or his Democratic challenger Joe Biden will be elected president. The benchmark 10-year yield, which earlier rose to 0.887%, its highest level since June, was last up 3.6 basis points at 0.884%. Yields on two- and five-year notes also reached multi-month highs earlier in the session. Bill Merz, head of fixed income research at U.S. Bank Wealth Management in Minneapolis, pointed to the potential for "a significant amount of volatility" in the market as some traders have positioned for Democrats to win the White House and control of Congress in the election. "In that scenario of a blue sweep, there is an expectation of a larger fiscal package and that would indicate additional supply as well as boost the prospects for reflationary pressures to reemerge," he said. Still, Merz noted the 10-year yield remained rangebound and that the U.S. Federal Reserve, which meets on Wednesday and Thursday, could discuss shifting its Treasury purchases to the long end of curve to prevent those yields from climbing too high. He added that a medical solution to end the coronavirus pandemic was more important than the U.S. election results due to its impact on the nation's economic recovery. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was last up less than a basis point at 0.1663%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, which is viewed as an indicator of economic expectations, was last at 71.63 basis points, 2.6 basis points higher from Monday's close. November 3 Tuesday 10:01AM New York / 1601 GMT Price Current Net Yield % Change (bps) Three-month bills 0.095 0.0963 0.000 Six-month bills 0.11 0.1116 0.000 Two-year note 99-235/256 0.1663 0.008 Three-year note 99-192/256 0.2102 0.013 Five-year note 99-72/256 0.3956 0.021 Seven-year note 98-244/256 0.6535 0.028 10-year note 97-148/256 0.884 0.036 20-year bond 94-180/256 1.4335 0.042 30-year bond 93-72/256 1.6619 0.039 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.50 -0.25 spread U.S. 3-year dollar swap 7.75 0.00 spread U.S. 5-year dollar swap 5.50 0.00 spread U.S. 10-year dollar swap 0.50 -0.25 spread U.S. 30-year dollar swap -36.00 0.25 spread (By Karen Pierog in Chicago and Dhara Ranasinghe in London; Editing by Bernadette Baum)
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