TREASURIES-Yields hover near four-month peaks, stimulus talks hog spotlight

LONDON, Oct 21 (Reuters) - U.S. Treasury yields held near their highest levels in four months on Wednesday on expectations that U.S. lawmakers will reach a new stimulus deal soon.

The White House and Democrats in the U.S. Congress moved closer to agreement on a new coronavirus relief package on Tuesday as President Donald Trump said he was willing to accept a large aid bill.

Signs of opposition from Trump's Republican Party may have added to some caution in markets, however, slowing the move higher in U.S. borrowing costs.

Senate Majority Leader Mitch McConnell provided no timetable and privately told his fellow Republicans that he did not favour a deal before the Nov. 3 presidential and congressional elections, a senior Senate Republican aide told Reuters..

In London trade, the benchmark 10-year U.S. Treasury yield was around 1.5 basis points higher on the day at 0.82% , having touched fresh four-month highs at 0.84%.

Analysts at ING noted demand for long-dated debt, suggesting a significant push above 0.80% was unlikely for now.

"Flows data in the past week clearly show buying in long duration products, which is acting to mute upside potential for yields," they said in a note.

Five-year Treasury yields also touched new four-month highs, before pulling back slightly. They were last up around 1 bps on the day at 0.35%.

Borrowing costs in the United States, the world's biggest economy, have also edged higher in recent weeks on a growing perception that further stimulus will be delivered following the November elections.

The yield curve, when measured by the gap between two and 10-year yields, briefly touched its widest since June at 66 basis points. The spread between two and 30-year bonds yields was also at its widest in more than four months, hovering just below 150 bps. (Reporting by Dhara Ranasinghe; Editing by Alex Richardson)

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