(Updates yields and developments on stimulus, adds analyst comments and 10-year Treasury inflation breakeven) By Karen Pierog CHICAGO, Dec 4 (Reuters) - U.S. Treasury yields shot higher and the yield curve steepened on Friday after a disappointing November employment report added to pressure for Washington to pass a new round of stimulus to help the coronavirus-battered economy. The selloff in Treasuries, which lost some steam later in the session, lifted yields particularly on the longer end of the curve. The benchmark 10-year yield climbed to its highest level since March at 0.986% and was last up 4.8 basis points at 0.9692%. Before retreating as the day wore on, the 20-year yield reached 1.541%, the highest since June, and the 30-year yield touched 1.75%, the highest since Nov. 10. The closely watched spread between two- and 10-year notes hit 82.56 basis points, the widest since February 2018 . It was last up about 6 basis points at 81.65 basis points. The U.S. Labor Department reported nonfarm payrolls increased by 245,000 jobs last month, the fewest in six months, after rising by 610,000 in October. Economists polled by Reuters had forecast payrolls increasing by 469,000 jobs in November. The unemployment rate fell to 6.7% from 6.9% in October. "We"re back in the bad-news-is-good-news camp," said Collin Martin, fixed income strategist at the Schwab Center for Financial Research in New York. "If this report can nudge Congress to pass some aid, that should be good for the overall economy, which should lead to slightly higher yields." U.S. House Speaker Nancy Pelosi on Friday pointed to momentum on stimulus talks, adding that a $908 billion bipartisan proposal could be the basis for negotiations. President-elect Joe Biden said the "grim" jobs report underscores the need for urgent action and that even if something is passed soon by Congress more relief would be needed in January. Guy LeBas, chief fixed income strategist at Janney Capital Management in Philadelphia, said more stimulus would mean more supply in the Treasury market. "I expect this curve steepening we’re seeing will continue into the auctions this month, if not longer,” he said. The U.S. Treasury will offer $56 billion of three-year notes, $38 billion of 10-year notes and $24 billion of 30-year bonds in auctions next week. Justin Hoogendoorn, head of fixed income strategy at Piper Sandler in Chicago, said economic data due out next week, including the consumer price index for November, will take a back seat to developments in Washington. "I don"t think there"s a lot of problematic or market moving numbers next week. I do think the market"s going to be focused on whether it looks like a stimulus package could come together," he said. One indicator of cautious optimism about economic reflation, the inflation breakeven on 10-year Treasury Inflation Protected Securities, rose to another new high since May 2019, ending at 1.869%. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was last down less than a basis point at 0.1527%. The spread between the five-year note and the 30-year bond reached its widest since Nov. 9 at 131.60 basis points. It was last 4.7 basis points higher at 130.7 basis points. December 4 Friday 3:14PM New York / 2114 GMT Price Current Net Yield % Change (bps) Three-month bills 0.08 0.0811 0.000 Six-month bills 0.0925 0.0938 0.003 Two-year note 99-242/256 0.1527 -0.002 Three-year note 100-26/256 0.2153 0.008 Five-year note 99-196/256 0.4226 0.018 Seven-year note 99-118/256 0.7043 0.033 10-year note 99-28/256 0.9692 0.048 20-year bond 97-120/256 1.5227 0.060 30-year bond 97-136/256 1.731 0.062 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.75 0.00 spread U.S. 3-year dollar swap 6.50 -0.50 spread U.S. 5-year dollar swap 6.25 0.75 spread U.S. 10-year dollar swap 0.50 1.25 spread U.S. 30-year dollar swap -29.00 2.00 spread (Reporting by Karen Pierog; additional reporting by Kate Duguid and Gertrude Chavez-Dreyfuss in New York; editing by Jonathan