TREASURIES-US yields rise, Fed policy in focus

By Karen Brettell

NEW YORK, Nov 20 (Reuters) - U.S. Treasury yields moved higher on Wednesday and benchmark 10-year yields consolidated near a more than five-month high as investors weighed when the Federal Reserve may pause its interest rate cutting cycle as U.S. economic growth remains above expectations.

Investors correctly betting that Republican Donald Trump would win the U.S. presidential election while Republicans also take control of Congress helped send yields higher over the past two months.

Market participants are now waiting on clarity over Trump's policies and the next round of jobs and inflation data that is likely to influence Fed policy.

"It seems like we're going to have to wait until the next nonfarm payroll release and the next CPI release to really see how that informs the Fed," said Michael Lorizio, head of U.S. rates trading at Manulife Investment Management.

A much-stronger-than-expected jobs report for September was followed by a much weaker one for October, though analysts noted that the last release was negatively affected by hurricanes.

A strong report for November would likely add to bets that the Fed is nearing a rate cutting pause.

Traders are pricing in a 59% probability the Fed will cut rates by 25 basis points in December, and only a 15% chance that it would be followed by another 25-basis point reduction in January, according to the CME Group's FedWatch Tool.

Benchmark 10-year note yields were last up 4.9 basis points at 4.428%. They reached 4.505% on Friday, the highest since May 31.

Two-year yields gained 3.2 basis points to 4.304%. They hit 4.379% on Friday, the highest since July 31.

The yield curve between two-year and 10-year notes steepened by around 1 basis point to 12 basis points.

Traders are also closely watching developments in the Russia-Ukraine war after Russian President Vladimir Putin on Tuesday lowered the threshold for a nuclear strike in response to a broader range of conventional attacks. Moscow said Ukraine had struck deep inside Russia with U.S.-made ATACMS missiles.

Putin is open to discussing a Ukraine ceasefire deal with Trump but rules out making any major territorial concessions and insists Kyiv abandon ambitions to join NATO, five sources with knowledge of Kremlin thinking told Reuters.

The Treasury Department will sell $16 billion in 20-year bonds later on Wednesday and $17 billion in 10-year Treasury Inflation Protected Securities on Thursday. (Reporting By Karen Brettell)