(Updates with market activity, details on TIPS, 5/30 curve) By Ross Kerber Feb 5 (Reuters) - The Treasury yield curve steepened on Friday as yields on the benchmark 10-year note soared to levels not seen in nearly a year while two-year yields hit record lows after U.S. jobs data strengthened expectations of more stimulus spending from Washington. The benchmark 10-year yield was last up 2.6 basis points at 1.1652% having risen to 1.188%, its highest since March 20, 2020. At the other end of the curve the yield on the 2-year note, seen as an indicator of inflation expectations, was down almost a basis point at 0.1072% after matching its all-time low of 0.105% last reached May 8, 2020. The movement left the closely watched part of the U.S. Treasury yield curve measuring the gap between yields on the two notes, seen as an indicator of economic expectations, at 106 basis points, about 4 basis points higher than Thursday"s close and its highest since April 2017. Priya Misra, TD Securities head of global rates strategy, said the volatile trading showed investors focused on incremental news about spending talks in Washington after the morning jobs report did not offer a clear case for either the Biden administration"s $1.9 trillion plan or the Republicans" smaller package. Expectations "are all over the place," she said. U.S. employment growth rebounded less than expected in January and job losses the prior month were deeper than initially thought, strengthening the argument for additional relief money from the government to aid the recovery from the COVID-19 pandemic. Analysts described the results as having mixed implications for government bond markets and giving traders a chance to take profits after yields on longer-term U.S. notes rose in recent days. "The jobs report isn’t bad. You should expect a lot of volatility at a time like this," said Subadra Rajappa, head of U.S. Rates Strategy for Societe Generale in New York. The unemployment rate was at 6.3% in January, which Rajappa said put it closer to achieving the 5% targeted by the U.S. Federal Reserve. ROOM TO RUN Yields on the 20- and 30-year notes also rose, with the latter just below the 2% level last seen a year ago. Another measure of the yield curve, the gap between 5-year and 30-year notes, was up 3 basis points at 150 basis points, the most since October 2015. U.S. Treasury investors are pricing for an uptick in inflation as the economy recovers and the U.S. Federal Reserve seems willing to let the economy run hot. The 10-year Treasury Inflation-Protected Securities" breakeven inflation rate, which briefly slipped below 2% last week, was last at 2.191% , indicating the market expects inflation to average more than 2% a year for the next decade, above the current pace of inflation. It went as high as 2.197%, highest since May 2018. U.S. stocks rose on Friday with the S&P 500 and the Nasdaq hitting record highs as stimulus talks, upbeat earnings and progress in vaccine rollouts bolstered bets of a speedy economic recovery. February 5 Friday 2:46PM New York / 1946 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0325 0.033 -0.005 Six-month bills 0.045 0.0456 -0.007 Two-year note 100-9/256 0.1072 -0.008 Three-year note 99-212/256 0.1838 -0.005 Five-year note 99-144/256 0.464 0.005 Seven-year note 99-132/256 0.8216 0.013 10-year note 97-84/256 1.1652 0.026 20-year bond 93-76/256 1.7787 0.038 30-year bond 92-76/256 1.9682 0.036 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 9.00 0.50 spread U.S. 3-year dollar swap 9.75 0.50 spread U.S. 5-year dollar swap 12.00 0.25 spread U.S. 10-year dollar swap 7.00 0.00 spread U.S. 30-year dollar swap -21.25 0.75 spread (Reporting by Ross Kerber in Boston; Editing by Jonathan Oatis, Kirsten Donovan and Andrea Ricci)