TREASURIES-US Treasury yields dip as investors await jobs, inflation data

By Karen Brettell

NEW YORK, Dec 15 (Reuters) - U.S. Treasury yields dipped on Monday as investors waited on jobs and inflation data due later in the week, which will provide the last look at major economic releases for the year.

An increasingly divided Federal Reserve has continued to cut rates on concerns about a weakening labor market even as many officials are concerned about sticky inflation.

A data void as the federal government catches up from a 43-day shutdown has added to uncertainty around the U.S. economic outlook.

In the absence of government reports, investors have followed private jobs indicators. “And so there seems to be a little bit less consternation about the November jobs report in particular,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.

“Part of it may also be that the Federal Reserve will have another month's worth of jobs data by the time they next need to make a decision, so this interim month's jobs data is not hugely important,” he added.

The monthly jobs report for November and retail sales data for October are due on Tuesday, consumer price inflation data is due on Thursday and Personal Consumption Expenditures for October is due on Friday.

The two-year note US2YT=RR yield, which typically moves in step with Fed rate expectations, fell 2.7 basis points to 3.506%. The yield on benchmark U.S. 10-year notes US10YT=RR fell 2.6 basis points to 4.17%.

The yield curve between two- and 10-year notes US2US10=TWEB was little changed on the day at 66 basis points.

Fed funds futures traders are pricing in only 27% odds that the Fed will cut rates at its January 27-28 meeting, with the next cut seen likely in April.

LeBas noted that those odds could change quickly depending on the data. “It's still my base case that labor market weakness, despite divided opinions on the FOMC, will spur additional rate cuts in the early part of '26,” he said.

Investors are also watching for who U.S. President Donald Trump will appoint to head the U.S. central bank when Jerome Powell's term ends in May.

Trump said on Friday he had narrowed his search for a new Fed chair to two people and he should at least be consulted on decisions about interest rates.

Meanwhile, the U.S. Supreme Court's conservative justices have signaled reluctance to give Trump authority over the Federal Reserve in a major case set to be argued next month.