(Updated with New York afternoon trading)

By Karen Brettell

Jan 10 (Reuters) - Longer-dated U.S. Treasury yields

jumped to their highest levels since November 2023 on Friday

after data showed employers added 256,000 jobs in December, far

surpassing economists' expectations, while the unemployment rate

fell.

Employers were expected to have added 160,000 jobs during

the month. The unemployment rate dipped to 4.1%, below forecasts

for 4.2%.

"This report will fuel yields even higher. The labor market

is not showing any signs of weakening," said Peter Cardillo,

chief market economist at Spartan Capital Securities in New

York.

Traders are now betting the Federal Reserve will wait until

at least June to reduce its policy rate. Before the monthly jobs

report, traders had seen the Fed cutting as early as May with

about a 50% chance of a second rate cut before the end of the

year.

"The market is saying that the Fed can embark on an extended

pause here, and momentum may continue to remain bearish until

data starts to soften," said Angelo Manolatos, macro strategist

at Wells Fargo in Charlotte.

Yields have jumped in recent months on expectations that

policies by the incoming Donald Trump administration will boost

growth and potentially also inflation, though there remains

considerable uncertainty over what policies exactly will be

implemented.

Concerns about the worsening U.S. budget deficit have also

underlined the move, while Fed officials have said that they

will be more cautious about further rate cuts as inflation

remains above their 2% annual target.

"In December, it was mainly the hawkish Fed and less of an

appetite for Treasuries generally, with investors getting more

concerned about deficits," said Manolatos. "Now, so far in 2025,

I think it's been a function of stronger data."

Benchmark 10-year Treasury yields reached 4.79%

while 30-year yields jumped to 5.005%, both the

highest since November 2023.

Interest rate-sensitive two-year yields rose to

4.39%, the highest since July 2024. The yield curve between

two-year and 10-year notes flattened by around 4

basis points on the day to 38 basis points.

Bank of America economist Aditya Bhave said in a report on

Friday that "after a very strong Dec jobs report, we think the

cutting cycle is over. Inflation is stuck above target, with

upside risks."

Chicago Fed President Austan Goolsbee said on Friday

that there is no evidence the U.S. economy is overheating again

despite a blowout December jobs report, adding he still expects

it will be appropriate to lower interest rates further.

Economic releases next week will include producer and

consumer price inflation data for December.