Short-dated yields rise before auctions

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NEW YORK, Dec 27 (Reuters) - Short-dated Treasury yields edged higher on Monday before the Treasury this week sells $169 billion in new short- and intermediate-dated notes, with two-year yields trading just below almost two-year highs reached this month.

The Treasury will sell $56 billion in two-year notes on Monday, $57 billion in five-year notes on Tuesday and $56 in seven-year notes on Wednesday. It will also sell $24 billion in two-year floating-rate notes on Wednesday.

The auctions come as many traders and investors are on vacation, with trading volumes this week expected to be low.

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Two-year yields rose three basis points to 0.715%. The yields had reached 0.731% on Dec. 10, which was the highest since March 2020. The short-dated debt is highly sensitive to interest rate expectations.

Five-year yields rose one basis point to 1.253% and seven-year yields rose half a basis point to 1.419%. Benchmark 10-year yields fell half a basis point to 1.488%.

Many analysts expect Treasury yields to rise in 2022, with the Federal Reserve expected to begin increasing rates as the economy rebounds from COVID-19 related business shutdowns. Fed fund futures traders are fully pricing in a rate hike by May.

December 27 Monday 9:04AM New York / 1404 GMT

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Editing by Alison Williams

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