Aug 4 (Reuters) - Traders sent U.S. Treasury yields lower on Wednesday after the government said it is considering a reduction in issuance, and after a lower-than-expected payroll report.
The benchmark 10-year yield was up down 3.8 basis points at 1.1357% and touched as low as 1.132%, its lowest since July 20.
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 97 basis points, about 3 basis points lower than Tuesday's close.
In a morning release, the Treasury Department said it will keep its coupon issuance steady over the coming quarter, but is considering reductions in future quarters. Potential cuts in issuance could be announced as soon as the November refunding, the department said.
The prospect of less supply sent yields down, said Guy LeBas, chief fixed income strategist for Janney, as Treasury officials prepared for less government spending. Still uncertain, however, is how much money Washington might finally allocate for roads, bridges and other building projects, a subject facing continued political bargaining.
"The surprise could be the final nature of the infrastructure spending," LeBas said.
Separately, U.S. private payrolls increased far less than expected in July, likely constrained by shortages of workers and raw materials, the ADP National Employment Report showed.
The yield on 10-year Treasury Inflation Protected Securities was -1.2% and touched a new record low of -1.216%.
The 10-year TIPS break-even inflation rate was at 2.34%, slightly lower than on Tuesday.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was a basis point lower at 0.1644%.
(Reporting by Ross Kerber in Boston; editing by Jonathan Oatis)
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