TREASURIES-US bond rally loses steam after Trump's tariffs pledge

By Davide Barbuscia

NEW YORK, Nov 26 (Reuters) - U.S. Treasury yields rose on Tuesday, as a sharp bond rally lost momentum and investors assessed U.S. President-elect Donald Trump's tariff pledges.

Trump said on Monday he would impose tariffs on products from Canada, Mexico and China, sparking volatility as investors braced for trade disputes. The announcement came after a sharp rally in bonds triggered by Trump's pick of hedge fund manager Scott Bessent as U.S. Treasury Secretary.

"I wouldn't make too much of today's price action," said Subadra Rajappa, head U.S. rates strategy at Soci?t? G?n?rale, adding the rebound in yields mostly indicated technical factors that contributed to the earlier rally had lost some steam.

The rise in yields was not meaningful enough to suggest inflationary concerns sparked by the tariffs threat, she added.

Benchmark 10-year yields were seen at 4.316%, up from 4.26% on Monday. Two-year yields, which tend to more closely reflect monetary policy expectations, were last at 4.287%, up slightly from Monday.

Investors digested a handful of economic data on Tuesday indicating the economy remained on solid footing. This included Federal Housing Finance Agency data showing U.S. single-family house prices increased solidly in September, as well as the November reading of Consumer Confidence released by the Conference Board, which was in line with expectations.

Later on Tuesday, investors will keep a close eye on the minutes of the Federal Open Market Committee meeting held on November 6-7, which may give clues on the Federal Reserve's thinking on the pace of future interest rate cuts.

Federal Reserve Bank of Minneapolis President Neel Kashkari said on Monday he was open to cutting interest rates again in December, after a 25 basis point cut earlier this month and a 50 basis point cut in September.

On Tuesday, rates futures traders were assigning a 56.2% probability to a 25 basis point cut next month, slightly above Monday's expectations.

On the supply side, the Treasury will sell $70 billion in five-year notes later on Tuesday, following a $69 billion two-year note auction on Monday that was well received by investors.

The closely watched yield curve comparing two- and 10-year Treasury yields steepened on Tuesday and was last at 2.7 basis points. It had inverted marginally on Monday, with short-term bonds yielding more than longer-dated ones. (Reporting by Davide Barbuscia, Editing by Nick Zieminski)