TREASURIES-Bonds steady in light trading, Trump policies in focus

* Trump policies prime drive of U.S. rate moves

* U.S. payroll data next week main economic focus

By Karen Brettell

NEW YORK, Nov 25 (Reuters) - U.S. Treasuries were steady on

Friday, after two-year yields hit 6 1/2-year highs overnight as

investors evaluated how much further the selloff sparked by the

surprise election of Republican Donald Trump as U.S. president

has to run.

Investors are betting that Trump will adopt policies that

increase spending and debt as well as spur growth and inflation,

which will erode the value of U.S. bonds.

Even (Taiwan OTC: 6436.TWO - news) at higher yields, investors are reluctant to buy the

debt in case weakness persists, with much uncertainty remaining

over the exact policies Trump will pursue.

"There are a fair number of people that think we're not

there yet, that yields can still move higher," said Gennadiy

Goldberg, an interest rate strategist at TD Securities in New (KOSDAQ: 160550.KQ - news)

York. "There are a number of people that want to buy in but also

don't want to get whipped by the next 25-to-30 basis point

selloff."

Benchmark 10-year notes were last down 1/32 in

price to yield 2.37 percent, up from 2.36 percent late on

Wednesday. The yields have jumped from about 1.80 percent before

Trump's election on Nov. 8.

Two-year notes, which are the most sensitive to interest

rate increases, were unchanged on the day to yield 1.14 percent.

The yields rose as high as 1.17 percent in overnight trading,

the highest since April 5, 2010.

Investors were seen as reluctant to enter new positions on

Friday with light liquidity a day after the bond market was

closed on Thursday for the Thanksgiving holiday. The bond market

will have an early close at 2 p.m. EST (1900 GMT) on Friday.

The next major economic focus will be next Friday's payrolls

report for November.

Month-end rebalancing before Wednesday also may increase

some demand for bonds.

The Federal Reserve's meeting on Dec. 13-14 also is in focus

as the U.S. central bank is viewed as highly likely to raise

interest rates for the first time this year.

Futures traders are pricing in 94 percent chance of a rate

hike at the December meeting, according to the CME Group (Kuala Lumpur: 7018.KL - news) 's

FedWatch Tool.

(Editing by Bill Trott)