(Updates with market activity, details from Congressional Budget Office report) By Herbert Lash NEW YORK, July 21 (Reuters) - Yields on U.S. Treasuries rebounded for a second day on Wednesday, with a sale of 20-year government debt on the weak side, as fears of new COVID-19 lockdowns eased and a rally in equity markets suggested renewed optimism about a robust economic recovery. The Treasury sold $24 billion of 20-year bonds to yield 1.890%, which was more than one full basis point higher than the yield at the bidding deadline and a bit weak, said Lou Brien, market strategist at DRW Trading. The bid cover at 2.33 to 1 was slightly less than average, he said. The yield on 10-year Treasury notes was up 8.8 basis points to 1.297%, after briefly crossing above 1.3% earlier in trading. The yield on the 30-year Treasury bond was up 7.4 basis points to 1.943%. Investors are grappling with when the Federal Reserve will begin to remove, or "taper," its support for the U.S. economy and whether a recent hike in inflation is transitory, as the Fed projects, or will be persistent as many in the market believe. Yields on the benchmark 10-year Treasury plunged almost 30 basis points from July 13, when data showed the biggest jump of U.S. consumer prices in 13 years in June, to a low of 1.128% early on Tuesday. Yields have rebounded almost 17 basis points since then. The U.S. Treasury Department is likely to be unable to pay its bills and provide funding for certain benefit programs sometime in October or November unless Congress approves legislation extending the agency"s statutory borrowing authority, the non-partisan Congressional Budget Office forecast on Wednesday. The federal government has shut down three times in the past decade over debt limit haggling in Congress. 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 108.5 basis points. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 1.6 basis points at 0.210%. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.482%. The 10-year TIPS breakeven rate was last at 2.298%, indicating the market sees inflation averaging about 2.3% a year for the next decade. July 21 Wednesday 3:57PM New York / 1957 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 0.000 Six-month bills 0.05 0.0507 0.000 Two-year note 99-214/256 0.2098 0.016 Three-year note 99-246/256 0.3882 0.031 Five-year note 100-170/256 0.7378 0.064 Seven-year note 101-92/256 1.0464 0.078 10-year note 103-8/256 1.2951 0.086 20-year bond 106-100/256 1.8628 0.080 30-year bond 109-196/256 1.9419 0.073 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.25 0.25 spread U.S. 3-year dollar swap 10.25 0.75 spread U.S. 5-year dollar swap 8.00 1.00 spread U.S. 10-year dollar swap 0.00 1.75 spread U.S. 30-year dollar swap -28.50 2.25 spread (Reporting by Sujata Rao, Herbert Lash and Ross Kerber; Editing by Marguerita Choy, Mark Heinrich and Sonya Hepinstall)