* Treasury benchmark yield hits 10 month high
* Dollar bounces after hitting near 3-year low
* U.S., global equity indexes at record highs (Updates prices, changes comment, dateline; previous LONDON)
By Rodrigo Campos
NEW YORK, Jan 7 (Reuters) - Bond prices dropped and stocks hit record highs on Thursday as investors bet his party's control of the U.S. Congress would enable President-elect Joe Biden to borrow and spend heavily, while higher yields helped a bruised dollar recover from near three-year lows.
U.S. Treasuries prices extended their steepest selloff in months, with the benchmark yield at its highest in 10 months, after victories in two Georgia races handed the Democratic Party narrow control of the U.S. Senate, bolstering Biden's power to pass his agenda as his party controls both chambers. MSCI world equity index .MIWD00000PUS , which tracks shares in almost 50 countries, rose over 1% to hit a record high for the third session this week.
A shaken Congress formally certified Biden's election victory in the early hours of Thursday, after hundreds of President Donald Trump's supporters had stormed the U.S. Capitol. shocking images of the assault had earlier knocked sentiment, though traders focused on the implications of the Democrats' control of Congress.
On Wall Street, major indexes hit record highs on bets that more pandemic stimulus under a Democrat-controlled U.S. government will help the economy ride out the downturn.
"You're seeing a reflation trade on the assumption that a more progressive and aggressive fiscal stimulus packages could be in the offing," said Keith Buchanan, portfolio manager at GlobAlt in Atlanta.
The Dow Jones Industrial Average .DJI rose 193.4 points, or 0.63%, to 31,022.8, the S&P 500 .SPX gained 50.26 points, or 1.34%, to 3,798.4 and the Nasdaq Composite .IXIC added 291.10 points, or 2.28%, to 13,031.89.
The pan-European STOXX 600 index .STOXX rose 0.51% and MSCI's gauge of stocks across the globe .MIWD00000PUS gained 1.03%. Emerging market stocks rose 0.22%.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS had risen 0.35% and Japan's Nikkei .N225 hit its intraday highest since 1990 before ending up 1.6%.
The prospect for future stimulus spending sent bond prices lower, with the yield on the benchmark hitting its highest since March. It rose as high as 1.088% on Thursday. US/
"The Georgia Senate elections just added a tailwind to existing trends of reflation and upward pressure on Treasury yields," said Bill Merz, head of fixed income research at U.S. Bank Wealth Management in Minneapolis.
Benchmark 10-year notes US10YT=RR last fell 11/32 in price to yield 1.0778%, from 1.042% late on Wednesday.
The 30-year bond US30YT=RR last fell 23/32 in price to yield 1.8527%, from 1.821%.
Meanwhile Germany's 10-year Bund yield DE10YT=RR dipped slightly to -0.55%.
BRUISED DOLLAR
The Democrats' victory reverberated in currency markets, too.
The dollar had sunk on the Senate vote results to a near three-year low against a basket of six major currencies =USD , with traders betting growing U.S. trade and budget deficits would further weigh on the greenback.
On Thursday it rose 0.666%, on track for its strongest session since at least late October, with the euro EUR= down 0.54% to $1.2259.
The Japanese yen weakened 0.82% versus the greenback at 103.90 per dollar, while Sterling GBP= was last trading at $1.354, down 0.49% on the day.
"Once the (Treasury yields) start to move, as they did yesterday, it wasn't a big move but it was in the right direction, that is the direction of the future," said Joseph Trevisani, senior analyst at FXStreet.com.
Oil prices touched their highest since late February on a fall in U.S. stockpiles and in the wake of a pledge by Saudi Arabia to cut output by more than expected.
U.S. crude CLc1 recently rose 0.22% to $50.74 per barrel and Brent LCOc1 was at $54.37, up 0.13% on the day.
Spot gold XAU= dropped 0.4% to $1,911.36 an ounce. Silver XAG= fell 0.95% to $27.04.
Bitcoin BTC=BTSP hit a record high as it approached the $40,000 mark, and was last up 7.21% at $39,507.76.
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http://tmsnrt.rs/2egbfVh MSCI All Country Wolrd Index Market Cap
http://tmsnrt.rs/2EmTD6j U.S. Treasury yield curves
https://tmsnrt.rs/38kig1l
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