* Fed rate policy next year in focus
* Thursday economic data includes GDP, personal income
* Treasury to auction 2, 5, 7-year notes next week
By Karen Brettell
NEW YORK, Dec 21 U.S. Treasuries were steady in
light trading volumes before the Christmas holiday with no new
economic data due on Wednesday, as investors evaluated how many
times the Federal Reserve is likely to raise interest rates next
"We've been trading in a fairly tight range the last couple
of days with low volumes. It's very holiday like trading," said
Dan Mulholland, head of Treasuries trading at Credit Agricole in
"I think people are trying to assess how the next year is
going to start off," Mulholland said.
Benchmark 10-year notes were little changed in
morning trade to yield 2.56 percent.
Yields have soared since Donald Trump's election as U.S.
President last month as investors bet that he will implement new
fiscal stimulus that boosts growth and inflation.
The Fed was also more hawkish than expected at its December
meeting last week, indicating that it may raise rates three
times next year.
That helped to send 10-year note yields to a more than
two-year peak and two-year note yields to their highest levels
Investors are evaluating whether the recent backup in yields
makes it a good time to buy bonds, of if yields are likely to
rise much further.
"In assessing the risk of where the market is, the risk of
disappointment from what people are counting on Trump to do in
terms of fiscal stimulus is probably a little bit to the
downside rather than overdelivering on the upside," said
"With that in mind we do think the market is a little bit
oversold at present," Mulholland said.
New supply of two-year, five-year and seven-year notes next
week, however, could add pressure to bonds as the auctions will
come in a holiday-shortened week when many traders will be on
Data on Thursday, including the third estimate of
third-quarter gross domestic product and personal income and
spending, will be watched for further indications about the
strength of the U.S. economy.
(Reporting by Karen Brettell, Editing by W Simon)