TREASURIES-Long bonds slide as speculation swirls over new Fed chair

SINGAPORE, Jan 30 (Reuters) - Long-dated U.S. Treasuries were sold in Asia on Friday on speculation President Donald Trump would nominate former Federal Reserve Governor Kevin Warsh to head the U.S. central bank and that he would push to reduce the amount of ?bonds the bank owns.

Thirty-year yields jumped more than five basis points to 4.91%. The short ?end of the market, which is priced for interest rate cuts this ?year, hardly budged - meaning the gap between two-year and ?30-year rates widened ?4.6 bps to 133.4 bps.

Benchmark 10-year yields rose 4.2 bps to 4.23%.

Yields rise when bond ?prices fall.

Trump said he intends to ?announce his pick to replace Jerome Powell on Friday. Bloomberg News reported the White House was preparing to nominate Warsh ?and a source told Reuters ?that Warsh met ?with Trump at the White House on Thursday.

In broader markets the speculation lifted the dollar and weighed on gold.

"(Warsh) is on ?record as saying he prefers lower rates. But the trade-off that he makes with lower rates is that he wants the Fed to have a smaller balance sheet," said Damien Boey, portfolio strategist at Wilson Asset Management in Sydney.

The long end is particularly susceptible to a ?smaller ?Fed balance sheet, Boey said, because it implies the central bank may be a less reliable backstop in the money markets. That's where ?hedge funds borrow to pay for "basis trades" that arbitrage small differences between cash and Treasury derivatives and have driven leveraged investment into long-dated paper.

"If you now change the assumption of protected money markets because the Fed is no longer on call...then obviously that trade starts to look less appealing and more risky."

Two-year yields ?rose a basis point to 3.565%. Fed funds futures have more or less stuck with pricing for two rate cuts this year, beginning in June or July, after the ?new Fed chair is slated to take over in May. (Reporting by Tom Westbrook)