TREASURIES-Prices fall as stock strength reduces demand for bonds

(Adds quotes, updates prices)

* Rate outlook is driving investors

* Personal (LSE: PGH.L - news) income, GDP data due on Thursday in focus

By Karen Brettell

NEW YORK, Dec (Shanghai: 600875.SS - news) 20 (Reuters) - U.S. Treasury prices fell on

Tuesday as stocks gained, reducing demand for safe-haven assets,

and with no new economic data to give further indications of the

strength of the U.S. economy.

Both the Dow and the Nasdaq (Frankfurt: 813516 - news) hit record highs on Tuesday, and

the blue-chip index was just 13 points shy of the 20,000 mark, a

level it has never scaled.

"The main reason for the increase today is the little bit of

risk-on trading," said Jim Vogel, an interest rate strategist at

FTN Financial in Memphis, Tennessee.

Bond prices rallied on Monday as some investors covered

short positions and as terrorism concerns prompted by the

assassination of the Russian ambassador in Turkey and a truck

attack on a Berlin Christmas market raised demand for low-risk

bonds.

U.S. benchmark 10-year Treasury notes were last

down 6/32 to yield 2.56 percent, up from 2.54 percent late

Monday.

Investors are skittish about buying bonds on concerns about

further yield increases as they evaluate how many times the

Federal Reserve is likely to raise interest rates next year.

Hawkish comments by Fed Chair Janet Yellen on the state of

the job market on Monday sent yields briefly higher, even as

bonds were generally stronger.

Yellen's comments followed the U.S. central bank's policy

statement last Wednesday, which was viewed as more hawkish than

expected and which sent 10-year note yields to more than

two-year highs and two-year note yields to their highest levels

since 2009.

Fresh economic forecasts, the first since Donald Trump won

the Nov. 8 presidential election on promises of tax cuts and

increased infrastructure spending, showed policymakers shifting

their outlook to one of slightly faster growth, lower

unemployment and inflation just under the Fed's 2 percent

target.

Yellen's tone also surprised some traders as she indicated

confidence the economy will support further rate increases even

though any new stimulus is unlikely until several months after

the start of the new administration.

"Over time we need to see what's going to be coming out of

the administration, and we probably won't have a firm handle on

that until probably the beginning of spring," said Tom Tucci,

head of Treasuries trading at CIBC (Dusseldorf: CAI.DU - news) in New York.

The Fed is "not going to have enough information to make

much of a move before June," Tucci said.

Data on Thursday, including the third estimate of

third-quarter gross domestic product and personal income and

spending, will next be watched for further indications about the

strength of the U.S. economy.

(Editing by Bill Trott and Leslie Adler)