(Recasts, updates yields, adds comments from analyst and Mnuchin) By Karen Pierog CHICAGO, Dec 1 (Reuters) - U.S. Treasury yields surged on Tuesday as a new push began in Congress to send federal aid to businesses and state and local governments slammed by the coronavirus pandemic. The benchmark 10-year yield was last up 7.7 basis points at 0.9194%, its highest level since mid-November, and the yield curve steepened. A bipartisan group of U.S. Senators and House of Representative members proposed a $908 billion relief bill that would fund measures through March 31. Guy LeBas, chief fixed income strategist at Janney Capital Management in Philadelphia, said increased expectations of a fiscal stimulus package during Congress" lame-duck session sparked a wave of selling on the long end of the yield curve. In Congressional testimony on Tuesday, U.S. Treasury Secretary Steven Mnuchin said he looks forward to reviewing the proposal, while urging an agreement on a plan that can be quickly passed. Prior to the hearing, Mnuchin told reporters he will talk with U.S. House Speaker Nancy Pelosi later on Tuesday about relief efforts, as well as funding action needed to keep the federal government operating. Funding for almost all U.S. government agencies expires on Dec. 11. Treasury yields briefly retreated a touch after the Institute for Supply Management reported that U.S. manufacturing activity slowed in November. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was last up 2.3 basis points at 0.1701%. 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 last at 75.50 basis points, 6.60 basis points higher than Monday"s close. December 1 Tuesday 11:25AM New York / 1725 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0875 0.0887 -0.002 Six-month bills 0.095 0.0964 0.002 Two-year note 99-233/256 0.1701 0.023 Three-year note 100-22/256 0.2208 0.035 Five-year note 99-202/256 0.4177 0.057 Seven-year note 99-156/256 0.6823 0.068 10-year note 99-148/256 0.9194 0.077 20-year bond 98-176/256 1.451 0.087 30-year bond 99-64/256 1.6569 0.086 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.25 -1.00 spread U.S. 3-year dollar swap 6.75 -1.50 spread U.S. 5-year dollar swap 4.25 -2.00 spread U.S. 10-year dollar swap -0.50 -0.75 spread U.S. 30-year dollar swap -31.00 0.25 spread (Reporting by Karen Pierog; editing by Jonathan Oatis and David