(Recasts with yield fall, adds auction results, adds quote, updates prices) By Karen Brettell NEW YORK, Nov 17 (Reuters) - U.S. Treasuries rallied on Wednesday as the recent backup in yields reached levels that drew buyers back to the securities, and after the Treasury sold 20-year bonds to tepid but not terrible demand. Benchmark 10-year yields reached 1.65%, the highest since Oct. 26, before reversing and falling back to 1.61%. They have increased from a low of 1.42% last week, before data showed that U.S. consumer prices posted their biggest gain in 31 years in October. “After the backup we’ve seen over the past few days an argument could be made that some technical factors are probably bringing some buying interest in,” said Ben Jeffery, an interest rate strategist at BMO Capital Markets in New York. “That 20 basis point selloff is a compelling dip to buy for people looking to add a little bit of duration before the end of the year.” Yields briefly spiked after the Treasury sold $23 billion in 20-year bonds at a high yield of 2.065%, more than one basis point above where they had traded before the auction. The 20-year bonds have suffered from relatively less demand than other maturities since they were reintroduced in May 2020. Twenty-year bond yields remained above those offered on 30-year bonds, where they have traded since Oct. 28. The 20-year bond yields were last at 2.05% while 30-year yields were at 2.00%. Inflation expectations also tumbled on Wednesday, with breakeven rates on five-year Treasury Inflation-Protected Securities (TIPS) falling to 3.16%, after reaching 3.24% on Tuesday. Investors are trying to gauge whether rising price pressures are becoming more entrenched, which could lead the Federal Reserve to hike rates faster than previously expected. The wait to see whether U.S. President Joe Biden will keep Jerome Powell as head of the U.S. central bank for a second term, or elevate Fed Governor Lael Brainard to the post, is adding additional uncertainty to the outlook. Brainard is seen as being more dovish than Powell, and could be more likely to let inflation run hotter for longer before tightening policy. Biden will likely decide on who he will nominate before Thanksgiving, a White House spokesperson said on Wednesday. Data on Wednesday showed that U.S. single-family homebuilding tumbled in October while the number of houses authorized for construction but not yet started jumped to a 15-year high, underscoring the disruption to the housing market from an ongoing shortage of materials and labor. November 17 Wednesday 3:01PM New York / 2001 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0525 0.0532 0.007 Six-month bills 0.065 0.0659 0.000 Two-year note 99-191/256 0.506 -0.014 Three-year note 99-176/256 0.856 -0.018 Five-year note 99-114/256 1.2408 -0.026 Seven-year note 99-60/256 1.4913 -0.029 10-year note 97-224/256 1.606 -0.028 20-year bond 95-56/256 2.0455 -0.013 30-year bond 97-60/256 1.998 -0.020 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 24.50 -0.25 spread U.S. 3-year dollar swap 19.50 -0.50 spread U.S. 5-year dollar swap 10.25 0.00 spread U.S. 10-year dollar swap 4.75 0.00 spread U.S. 30-year dollar swap -20.25 -0.50 spread (Editing by Kirsten Donovan and Chizu Nomiyama)