×

TREASURIES-Bonds steady before New Year, busy data week ahead

* Busy week of data expected in the new year

* Five-year yields have largest annual increase since 2013

* Bond market to close early before New Year's Day holiday

NEW YORK, Dec 29 (Reuters) - Most U.S. Treasuries were little changed on Friday with many investors and traders out ahead of Mondays New Year's Day holiday, before a heavy week of data due in the new year. Trading volumes have been light this week, with the market focused mostly on $88 billion in new short and intermediate-dated supply, which was sold to mostly below average demand. The economic calendar was light this week, though data next week will include numerous manufacturing and service sector releases in addition to the employment report for December. The data and any news around efforts by the Trump administration to boost growth will be evaluated for their outlook for the economy and how many rate increases are likely during the year. Next week will be very busy, analysts at NatWest Markets wrote in a note on Friday. There is a ton of top tier data out as well as the potential for political news if Trump kicks the year off with a strong drive for infrastructure spending. Short- and intermediate-dated notes, which are highly sensitive to interest rate increases, have underperformed this year as investors priced in expectations of improving economic momentum.

Five-year note yields are on track for their

largest annual increase since 2013 with a 16 percent rise to 2.23 percent.

Two-year note yields have risen 58 percent during

the year, their largest increase since 2014, to 1.90 percent. The yield curve between two-year and 10-year notes fell to 50 basis points on Wednesday, the flattest level since Oct. 2007. The Federal Reserve has indicated that an additional three increases are likely next year, though interest rate futures traders are pricing in only two. The U.S. central bank will release minutes from its December meeting, when it raised rates for the third time this year, on Wednesday. An uptick in Treasury supply, which is expected to initially be concentrated in bills and shorter-dated notes, is also a key focus for investors as the U.S. Treasury makes up for declining bond purchases by the Fed. The bond market will close early on Friday at 2 p.m. EST (1900 GMT) and will be closed on Monday for the New Year's Day holiday.

(Reporting by Karen Brettell; Editing by Phil Berlowitz)

)