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* Yellen now seen as front-runner as next Fed chief * U.S. yields fall to lowest levels so far in September * Futures signal traders pushing out timing on rate hike * U.S.-Russia pact on Syria seen paring safety bidsfor bonds By Richard Leong NEW YORK, Sept 16 (Reuters) - U.S. Treasuries debt prices rose on Monday after the withdrawal by Lawrence Summers for consideration as chairman of the Federal Reserve eased fears of more aggressive monetary policy tightening if he were to head the U.S. central bank. Bond yields fell to their lowest levels so far in September, led by the yield on the five-year note, which fell 11 basis points. The interest rate on one-month bills dipped below zero. The surprise withdrawal on Sunday by Summers, a former Treasury secretary and former top economic aide to President Barack Obama, came two days before Fed policymakers meet and coincided with the five-year anniversary of the collapse of Lehman Brothers. It was widely perceived as positive for bonds as well as stocks. Traders now expect the Fed's vice chair, Janet Yellen, will be the front-runner to succeed Ben Bernanke, whose term expires in January. It is expected that Yellen would continue the Fed's likely slow, cautious approach to reduce its bond-buying program, which is designed to stimulate the economy. "Assuming Janet Yellen moves to the fore, it should reduce uncertainty across markets, increasing the likelihood of continuity at the Fed and an ultra-smooth transition," said Robert Tipp, chief investment strategist with Prudential Fixed Income in New Jersey. A Yellen-led Fed would also likely mean the U.S. central bank will take its time to raise short-term rates, even after it halts the bond purchases. Summers's withdrawal lifted Yellen's perceived chances to become the Fed's first female leader, but the White House has not made a decision on its nominee. Other candidates who are said to be still in contention for the job include Donald Kohn and Roger Ferguson, both of whom are former vice chairs of the Fed. The shift in thinking about Fed leadership led to a sharp drop in yields in short-dated Treasuries, which earlier this month hit their highest levels since May 2011, partly on worries over Summers as the next Fed chief. Fed policymakers will meet on Tuesday and Wednesday, when Wall Street analysts anticipate they will decide on shrinking their current monthly $85 billion in purchases of Treasuries and mortgage-backed securities. Given the sluggish pace of the economic recovery, the Federal Open Market Committee, the central bank's policy-setting group, will likely opt for a small reduction in purchases, according to economists and traders. "A small tapering is in the offing, something in the order of $10 billion. That's still a lot of stimulus coming to the economy," said Kevin Giddis, head of fixed income capital markets with Raymond James in Memphis, Tennessee. Monday's data on industrial output and regional manufacturing suggested the U.S. economic recovery could manage with less Fed stimulus. In the meantime, the Fed bought $927 million in Treasuries due in November 2024 to February 2031, part of its planned $45 billion of Treasuries purchases in September. In the U.S. government bond market, the impact of Summers's withdrawal for consideration as Fed chairman was mitigated by a pact between the United States and Russia to secure and rid Syria of its chemical weapons under international supervision. Fears over a possible U.S. military strike against Syria had stoked safe-haven demand for bonds. It is unclear whether the bond market rally can be sustained heading into the Fed meeting, traders said. "I don't think it will go much further from here," said Raymond James' Giddis. "For the bond market, it's shortcovering with some people who were caught a bit by surprise with the Summers announcement." On the open market, the yield on the two-year Treasury bill fell about 5 basis points from late Friday to 0.387 percent after hitting 0.375 percent earlier in overseas trading, its lowest level in about 2-1/2 weeks. Longer-dated yields fell sharply, too. The benchmark 10-year yield declined almost 7 basis points to 2.820 percent after earlier touching its lowest level in two weeks. In the futures market, traders dialed back expectations the Fed will soon move away from its current near-zero interest rate policy adopted in December 2008.\ Federal funds futures implied traders priced in a 55 percent chance of the central bank raising rates at the end of 2014 , down from 68 percent on Friday, according to CME Group's FedWatch, which calculates traders' view on Fed policy.