(Recasts, updates yields) By Karen Pierog CHICAGO, Nov 5 (Reuters) - U.S. Treasury yields tumbled and the curve flattened in choppy trading on Friday amid uncertainty as to how the latest employment data, which showed job growth surged more than expected in October, could affect the timing and size of future Federal Reserve rate hikes. The benchmark 10-year yield, which fell to its lowest level since Sept. 24 at 1.436% and marked its biggest downward move since July 19, was last 7.4 basis points lower at 1.4496%. The two-year yield, which hit a session high of 0.458% following the data"s release, was last down 1.6 basis points at 0.4008% Last week, it reached a 19-month peak of 0.5640% amid heightened expectations of a Fed interest rate hike in 2022. The five-year yield, another part of the curve that is sensitive to Fed rate expectations, jumped as high as 1.146%. It was last 5 basis points lower at 1.0539%. Nonfarm payrolls increased by 531,000 jobs last month, according to the U.S. Labor Department, which also revised September data higher to show 312,000 jobs created instead of the previously reported 194,000. Economists polled by Reuters had forecast payrolls rising by 450,000 jobs in October. "It"s a reflection of better economic data should give the Fed more coverage to be more aggressive in normalization, so I think that"s kind of why we"ve seen the curve flatten," said Ben Jeffery, an interest rate strategist at BMO Capital Markets. He added that the 10-year yield falling below 1.5% triggered some technically driven buying. Gennadiy Goldberg, senior rates strategist at TD Securities, said the market was lowering its forecast for the terminal funds rate, which would be the level where the Fed stops hiking rates. "The market is pushing back on the notion that the Fed is going to be able to hike rates too aggressively here," he said. After the U.S. central bank announced on Wednesday that it would start tapering its asset purchases this month and stuck to its view that high inflation is expected to be transitory, Fed Chair Jerome Powell told reporters the economy is not yet at maximum employment, meaning it is not time to raise interest rates. Goldberg said some of Friday"s market volatility could be investor positioning ahead of the weekend. "It is a very noisy, very choppy market and I think that chop is going to continue into next week when we get the (consumer price index) report," he said. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes marked its biggest flattening move in just over a week. It was last 6 basis points flatter at 104.20 basis points. The spread between five-year notes and 30-year bonds flattened by about 2 basis points to 83.10 basis points. The three-month bill to 10-year note curve had its largest flattening move since July 19 and was last 8 basis points lower at 140.20 basis points. The longest end of the curve was inverted for a seventh straight session. The 20-year yield was last at 1.8926% and the 30-year yield at 1.8857%. After announcing cuts in auction sizes on Wednesday, the U.S. Treasury will sell $120 billion of notes and bonds due in three, 10, and 30 years next week, down from $126 billion in the week of Aug. 9 following the previous quarterly refunding. "From a fundamental supply and demand perspective, with the recent cut and solid demand that we"ve sort of seen for duration, especially from foreign bidders, it seems likely that the auctions should go over well," said Zachary Griffiths, macro strategist at Wells Fargo. November 5 Friday 4:04PM New York / 2004 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0475 0.0482 0.007 Six-month bills 0.0675 0.0685 0.002 Two-year note 99-243/256 0.4008 -0.016 Three-year note 99-234/256 0.6546 -0.024 Five-year note 100-88/256 1.0539 -0.050 Seven-year note 100-104/256 1.3139 -0.065 10-year note 98-48/256 1.4496 -0.074 20-year bond 97-168/256 1.8926 -0.075 30-year bond 102-152/256 1.8857 -0.077 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 19.75 -1.00 spread U.S. 3-year dollar swap 20.50 -1.25 spread U.S. 5-year dollar swap 9.00 -0.75 spread U.S. 10-year dollar swap 2.25 -0.75 spread U.S. 30-year dollar swap -21.75 -0.25 spread (Reporting by Karen Pierog; Editing by Dan Grebler, Kirsten Donovan and Jonathan Oatis)