TREASURIES-Yields climb as strong data, profit-taking halt bond rally

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Fed expected to cut rates by 25 basis points in December

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Benchmark 10-year yields test 4% level, two-year yields rise

By Davide Barbuscia

NEW YORK, Nov 26 (Reuters) - U.S. Treasury yields rose on Wednesday on stronger-than-expected economic data and as investors locked in gains after a four-day bond market rally. New orders for core U.S.-made capital goods jumped in September, while shipments rose strongly, reinforcing economists' expectations of faster economic growth in the third quarter, data from the Commerce Department's Census Bureau showed on Wednesday. New filings for U.S. jobless claims fell last week, signaling persistently low layoffs. However, the labor market remains too weak to create sufficient jobs amid economic uncertainty, the Labor Department said.

Treasury yields inched higher after the data releases, which added selling pressure to a market already in consolidation mode after a string of gains. Yields move inversely to prices.

FEDERAL RESERVE MEETING IN FOCUS

"You have a combination of the data ... and also you have to look at the path of yields over the course of the last two weeks, clearly testing the 4% level on the 10-year yield," said Art Hogan, chief market strategist at B. Riley Wealth.

Wednesday's data did not alter expectations that the Federal Reserve will cut interest rates by 25 basis points in December. Those assumptions have driven recent gains in the bond market.

Rates futures traders were assigning an 83% probability to a December rate cut, down marginally from 85% on Tuesday, CME Group data showed.

Such expectations gained consensus over the past week as several Fed officials said they favored further easing at the central bank's upcoming rate-setting meeting.

"Almost all of the parade of Fed speakers we've heard from look at the near-term impact of core goods pricing being higher because of tariffs as something that is a one-time event, whereas they look at the weakness in the labor market as something that's an ongoing trend," said Hogan.

Benchmark 10-year yields were last at 4.038%, about three basis points higher on the day. On Tuesday, they dropped below 4% for the first time in nearly a month.

Two-year yields were at 3.504% in morning trade, over four basis points higher.

Later on Wednesday, the Treasury Department will sell $44 billion in seven-year notes. Investors will also keep an eye on the Fed's snapshot of economic conditions, the Beige Book, due at 2 p.m. ET (1900 GMT).

(Reporting by Davide Barbuscia Editing by Rod Nickel)