* Fed's Bernanke express cautious optimism on U.S. economy * Fed's Lacker's rate-hike remarks push up short-dated yields * Benchmark yields hold near 3 percent in light volume * Supply, FOMC minutes, payrolls data in focus next week By Richard Leong and Karen Brettell NEW YORK, Jan 3 (Reuters) - U.S. Treasuries prices fell on Friday with benchmark yields ending at 3 percent after Federal Reserve Chairman Ben Bernanke gave an upbeat outlook on the U.S. economy, supporting the view the Fed will continue to scale back its bond purchases in 2014. Bernanke, who will leave as the head of the U.S. central bank at month's end after seven years, also cautioned at an event in Philadelphia the overall economic recovery since the Great Recession "clearly remains incomplete." Bernanke's comments knocked longer-dated Treasuries prices from their session highs as investors prepared for a busy week when the U.S. Treasury Department will sell $64 billion in coupon-bearing supply and the Fed will release the minutes of its Dec. 17-18 policy meeting where it decided to start paring back its third round of quantitative easing in January. Investors also await December U.S. payrolls data to help them determine whether domestic job growth is strong enough for the Fed to further dial back its QE3 bond purchases. Analysts downplayed the moves in the Treasuries market in the first two trading days of 2014. The market had just suffered its third worst year in four decades. The market has been rudderless due to light trading volume stemming from a holiday in Japan and a winter storm in the northeastern United States. [ID: nL2N0KD0P3] "We don't have people putting on big positions yet. But the trend is clear that yields are rising. It's hard to make an exceptional case for Treasuries," said David Keeble, global head of interest rates strategy at Credit Agricole Corporate & Investment Bank in New York. Bond prices also gave up their earlier modest gains in late trading after Richmond Federal Reserve President Jeffrey Lacker told an event in Baltimore he expects the Fed might raise short-term interest rates from zero in early 2015 and perhaps sooner if the economy strengthens more than forecast this year. The consensus on Wall Street has been the Fed would not hike rates until late 2015. Lacker's rate-hike remarks spurred some selling in the two-and three-year sector since it is most vulnerable to an earlier-than-expected rate increase. Yields on two- and three-year Treasuries rose 2 basis points to 0.400 percent and 3 basis points to 0.779 percent, respectively . Longer-dated maturities fared slightly better. Benchmark 10-year Treasuries notes fell 4/32 in price to yield 3.000 percent, up 1.5 basis points from late Thursday, while the 30-year bond slipped 4/32 in price to yield 3.928 percent, up 1.2 basis points from Thursday. The 10-year yield hit a near 2-1/2-year high of 3.041 percent on Thursday, according to Reuters data. FED MINUTES, SUPPLY, PAYROLLS The Fed meeting minutes for December, slated for release next Wednesday, will next take focus for signs over how far the Fed may further pare back its bond purchases. The U.S. central bank said last month it would cut its mortgage-backed securities and Treasuries purchases by $10 billion to $75 billion a month. The Fed will resume its Treasuries buying on Monday, with scheduled $1 billion and $1.50 billion purchases in bonds due in 2036 and 2043. As the central bank buys more debt, the Treasury Department will sell $30 billion in three-year debt on Tuesday ; $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday . Next week's key factors will culminate on Friday with the December payrolls report, which economists polled by Reuters expected will likely show U.S. employers added 197,000 jobs last month and the jobless rate held at a five-year low of 7.0 percent. Some traders see Treasuries as likely to become more volatile as investors adjust to the change in leadership at the Fed, and to the reduction in the bond purchase program. The U.S. Senate has set a Monday vote on President Barack Obama's choice of Janet Yellen to replace Bernanke. Yellen is the current Fed Vice Chair, the Fed's second most powerful position.