TREASURIES -US yields slide after inflation cools in November

(Adds analyst comment, details on inflation data, Fed rate cut odds, byline; updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, Dec 20 (Reuters) - U.S. Treasury yields fell on Friday after data showed inflation in the world's largest economy moderately cooled last month, backing the Federal Reserve's interest rate cut of a quarter of a percentage point earlier this week and bolstering expectations of two more reductions next year.

The benchmark 10-year yield slid 6.6 basis points (bps) to 4.504%. On Thursday, it hit a 6-1/2 month high of 4.594% as the market priced in more inflation pressures under a Donald Trump administration in 2025, with tariffs and tax cuts.

On the shorter end of the curve, the two-year yield, which is more sensitive to the policy-rates outlook, fell 5.8 bps to 4.261%.

The report showed that monthly inflation slowed in November after showing little improvement in recent months. The personal consumption expenditures (PCE) price index rose 0.1% last month after an unrevised 0.2% gain in October.

U.S. consumer spending, however, rose in November. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew 0.4% last month after a downwardly revised 0.3% gain in October.

Following the data, U.S. rate futures have priced in 44 bps of rate easing or close to two cuts of 25 bps, LSEG calculations showed. Futures showed just 37 bps of rate reductions in 2025 late on Thursday.

The earliest rate cut is now seen at the March meeting with a 54% probability, LSEG data showed. On Thursday, it showed that the earliest rate move would be June, with a 65% likelihood.

"November inflation was more benign than expected but the stickiness of some categories supports the Fed's hesitancy to materially lower rates next year," wrote Jeffrey Roach, chief economist at LPL Financial, in emailed comments.

"The economy continues to grow from strong consumer demand as income growth and the wealth effect from higher portfolio values give consumers capacity to spend." (Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci)