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

By Karen Brettell

NEW YORK, Dec (Shanghai: 600875.SS - news) 29 (Reuters) - Most U.S. Treasuries were

little changed on Friday with many investors and traders out

ahead of Monday’s 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 (Frankfurt: 779551 - news) 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 (Shenzhen: 000069.SZ - news) . 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)

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