TREASURIES-10-year yields dip, after hitting four-month high

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Yields fall from 4-month high after strong 7-year auction

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Traders wary of bonds before next week's U.S. elections

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Job openings fell in latest month

(Updated at 1500 EDT)

By Gertrude Chavez-Dreyfuss and Karen Brettell

NEW YORK, Oct 29 (Reuters) -

Benchmark 10-year U.S. Treasury yields hit a nearly four-month high on Tuesday on investor wariness to buy the debt before next week's U.S. elections, but dipped later in the day after a strong seven-year note auction.

Betting markets show Republican former President Donald Trump as the favorite to win the Nov. 5 presidential election, which could also put Republicans in control of Congress.

"The bond market is attaching a higher probability of a Trump victory," said Thierry Albert Wizman, global rates and FX strategist at Macquarie in New York.

The U.S. budget deficit is expected to worsen under a presidency held by Trump or Vice President Kamala Harris, though Trump policies including tariffs and tax cuts are seen as being more likely to stoke inflation and lead to a bigger deficit.

"The market seems to not want to take the risk at this point of the prospect of higher deficits and bond issuance over the next few years under the policy agenda of President Trump," Wizman said.

Interest rate option traders are placing trades that will pay off if rates remain elevated, suggesting that the market is pricing in a sweep by the Republican party. The options market is also bracing for the biggest post-election swings in U.S. Treasury yields in more than 30 years.

Benchmark 10-year yields were last down 0.6 basis point at 4.272%, after earlier hitting a nearly four-month peak of 4.339%.

Thirty-year yields fell 1.2 basis points to 4.518%. Earlier in the session, they climbed to 4.583%, the highest since July 3.

Two-year yields fell 2.3 basis points to 4.117% . They hit a high of 4.179%, their strongest level since Aug. 1.

The yield curve between two-year and 10-year notes, meanwhile steepened to 15.3 bps.

Yields fell after the Treasury Department saw strong demand for a $44 billion sale of seven-year notes on Tuesday, the final coupon-bearing auction this week.

The notes sold at a

high yield of 4.215%

, almost two basis points below where they had traded before the auction. Demand was above average at 2.74 times the amount of debt on offer.

Soft demand for auctions of two-year and five-year debt on Monday had helped yields rise before the seven-year sale.

The Treasury is expected to keep most of its

auction sizes steady

in the coming quarter when it updates its funding plans on Wednesday.

It said on Monday that it

plans to borrow

$546 billion in the fourth quarter, $19 billion less than the July estimate.

Traders are also focused on Friday's jobs report for October, which is expected to show that employers added 115,000 jobs during the month.

A

much stronger than expected

jobs report for September led traders to price out the odds of additional 50 basis point rate cuts by the Federal Reserve.

Data on Tuesday showed that U.S. job openings fell to 7.443 million last month, a 3-1/2 year low, suggesting considerable easing in labor market conditions.

U.S. consumer confidence, on the other hand, exceeded estimates with an October reading of 108.7, a nine-month high, up from 99.2 the previous month.

Traders see a 25 basis point cut at the Fed's Nov. 6-7 meeting as near certain, but only 73% odds of a 25 basis point reduction at both its November and December meetings, according to the CME Group's FedWatch Tool. (Reporting by Gertrude Chavez-Dreyfuss and Karen Brettell; Editing by Susan Fenton and Andrea Ricci)