TREASURIES-Yields rise, bonds on track for worst month since Jan 2009

(Adds monthly performance, updates prices)

* Trump policies primary driver of U.S. yield moves

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

* Two-year note yields hit highest since 2010

By Karen Brettell

NEW YORK, Nov 25 (Reuters) - U.S. Treasury yields rose on

Friday and 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 would 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 dropped 5/32 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 steady on the day to yield 1.14

percent. The yields rose to 1.17 percent in overnight trading,

the highest since April 5, 2010.

Treasuries were on track for their worst monthly performance

since January 2009, according to Bank of America Merrill Lynch's

U.S. Treasury index, with a loss of 2.77 percent so

far.

Investors were reluctant to enter new positions with light

liquidity a day after the bond market was closed on Thursday for

the U.S. 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 the U.S. payrolls

report for November due on Dec. 2.

Month-end rebalancing before Wednesday may increase some

demand for bonds.

The Federal Reserve's meeting on Dec. 13-14 will also be

closely watched 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 and Meredith Mazzilli)