NEW YORK, Dec 26 (Reuters) - The yield on the benchmark

U.S. Treasury note rose to an eight- month high in thin holiday

trade on Thursday, shaking off weekly data showing a solid

employment picture that should allow the Federal Reserve to

adopt a less dovish stance in 2025.

Claims for unemployment insurance were 219,000 in the latest

week, less than the previous period's 220,000 and economists'

forcasts for 224,000.

The main event of the day looks like the seven-year note

auction after noon. Otherwise no one wants to trade when so few

investors are participating the day after Christmas, and

numerous financial centers, including London, remained closed.

The 10-year yield was up 4.6 basis points from

late Tuesday, before the Christmas holiday, at 4.633%. It hit

4.641%, the highest level since May 2. The yield on the 30-year

bond was 4.7 basis points higher at 4.807%.

The two-year U.S. Treasury yield, which

typically moves in step with interest rate expectations,

rose 3.1 basis points to 4.361%.

A closely watched part of the U.S. Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, seen as an indicator of economic

expectations, was at a positive 27.0 basis points, steeper than

Thursday's late spread at +24.8 bp.

Based on the fed funds futures term structure,

traders see minimal chance that the Fed will ease at it's

January meeting, after delivering a quarter point cut earlier

this month. That brought the fed funds target to 4.25%-4.50% and

was it's third since it became more accomodative in September,

after leaving its target rate at 5.25% to 5.50% since July 2023.

Fed officials cite strong employment, solid growth and slow

progress lowering inflation to its 2% target as possible reasons

to let up on the easing. So, markets are pricing accordingly.

In fact the 10-year TIPS breakeven rate was

last at 2.362%, indicating the market sees inflation averaging

just under 2.4% a year for the next decade. The breakeven rate

on five-year U.S. Treasury Inflation-Protected Securities (TIPS)

was last at 2.420%

According to LSEG data, traders don't see another interest

rate reduction until May and see a less than 50/50 chance of

another 25 basis points from there by year end.