TREASURIES-US yields tick up to start holiday-shortened week

By Matt Tracy

Dec 22 (Reuters) - Benchmark U.S. 10-year Treasury yields on Monday ticked up as the market was preparing for the holiday-shortened week.

The yield on 10-year Treasury notes US10YT=RR was last up 0.3 basis points (bps) at 4.154%.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was last up 1.1 bps at 3.485%.

The yield on the 30-year Treasury bond US30YT=RR was up 0.7 bps at 4.828%.

Yields were largely unmoved following the release on Monday of the Chicago Federal Reserve's national activity index.

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, which is seen as an indicator of economic expectations, was at 66.5 bps.

The U.S. dollar 5-year forward inflation-linked swap USIL5YF5Y=R, seen by some as a better gauge of inflation expectations due to possible distortions caused by the U.S. central bank's quantitative easing, was last at 2.458%.

The Treasury Department will hold several key auctions this week. It will auction $69 billion in two-year notes later on Monday, then $70 billion in 5-year notes US5YT=RR on Tuesday and $44 billion in seven-year notes US7YT=RR on Wednesday.

Odds of a Fed rate cut at the policy meeting in late January are priced as low as just under 20%, according to CME Group data, despite recent U.S. data showing the Consumer Price Index rose at a 2.7% annualized rate in November.

Bond markets will close early at 2 p.m. EST on Wednesday (1900 GMT) and remain shut through Christmas Day on Thursday.