TREASURIES-US yields tick lower to start New Year's week

By Matt Tracy

Dec 29 (Reuters) - Treasury yields ticked lower to start the final week of 2025, as the market watches for any major signs of the U.S. economy's state.

The yield on 10-year Treasury notes US10YT=RR was down one basis point (bp) from Friday's close to 4.123%.

The yield on the 30-year Treasury bond US30YT=RR was last down 1.1 bps to 4.808%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=RR, seen as an indicator of economic expectations, was at 65.5 bps.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was last down 1.5 bps at 3.468%.

The U.S. dollar 5 years forward inflation-linked swap USIL5YF5Y=R, seen by some as a better gauge of inflation expectations due to possible distortions caused by the Fed's quantitative easing, was last at 2.446%.

The decline in yields comes after data showing contracts to purchase previously owned U.S. homes unexpectedly shot to the highest in nearly three years in November, as improving affordability conditions drew in buyers, the National Association of Realtors said on Monday.

Pending home sales rose 3.3% last month after an upwardly revised 2.4% gain in October, the NAR said. Economists polled by Reuters had forecast contracts rising 1%.

Market odds of a cut in a key interest rate at the Federal Reserve's January meeting were last at 18.8%.

Market participants are watching closely for any key datapoints that could point to a rate cut in January. This will likely come in January with the next major inflation and jobs reports.

"We’ll have to wait until January to get first-tier data that might move the needle or speeches from key members of the (Federal Open Market Committee)," said Eric Winograd, director of developed market economic research at AllianceBernstein.