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* Fiscal cliff averted, U.S. debt yields jump
* Data releases to show health of U.S. economy
* Focus switches to debt ceiling debate
By Marius Zaharia
LONDON, Jan 2 (Reuters) - U.S. 10-year bond yields jumped to two-week highs on Wednesday after lawmakers approved a deal preventing a round of automatic fiscal tightening that could have pushed the world's top economy into recession.
The Republican-controlled House of Representatives approved a bill that will raise taxes on top earners, avoiding a "fiscal cliff" of $600 billion in tax hikes and spending cuts.
This prompted investors to move some of their money out of safe-haven assets such as U.S. or German government bonds into higher-yielding, riskier assets, such as equities.
"The big issue at the end of last year was the fiscal cliff, and that seems to be averted, so you'd assume riskier assets would do better in the near term," said Alan McQuaid, economist at Merrion Stockbrokers in Dublin.
Ten-year T-note yields were last 7.9 basis points higher at 1.8353 percent, having hit a two-week high of 1.839 percent earlier in the day. T-note futures were last 25/32 lower at 132 in European trade.
Yields may rise further if data including the ISM manufacturing PMI survey later on Wednesday or the non-farm payrolls report on Friday show the U.S. economy improving.
However, analysts said a massive sell-off in U.S. debt was unlikely. In addition to further fiscal tightening, lawmakers must still agree in the next few weeks on raising the government's borrowing limit.
The Federal Reserve's loose monetary policy is also expected to keep yields relatively subdued for a long period, especially on short-dated paper.
"We have a modest steepening bias as the two-year is unlikely to be much affected as expectations for ultra accommodative Fed monetary policy should remain unchanged," UniCredit strategists said in a note.
"No big repricing, however, as the deal leaves a drag on U.S. growth and the uncertainty regarding the debt ceiling still needs to be worked out."