By David Randall
       NEW YORK, Jan 3 (Reuters) - U.S. Treasury yields climbed
on Wednesday as investors awaited economic data to get a better
reading of whether the U.S. economy is set for a soft landing.
    Yields plummeted to six-month lows in December following
signs of cooling inflation and signals from the Federal Reserve
that its most aggressive hiking cycle since the 1980s was over.
Yet over the last two weeks yields have inched upward as traders
re-evaluate their expectations of rate cuts. 
    Markets are pricing in a 25% chance that the Fed holds
benchmark rates at their current range of 5.25% to 5.5% at its
March policy meeting, up from a 21% chance seen yesterday,
according to CME's FedWatch Tool. Futures markets see a 67%
chance of 25 basis point rate cut.
    "We had a decent run in Treasury rates but we're seeing
things moving back toward 4% on the 10-year and it will probably
continue to go higher from here," said Charlie Ripley, Senior
Investment Strategist for Allianz Investment Management.
    The yield on 10-year Treasury notes was up 4.4
basis points to 3.988%. The yield on the 30-year Treasury bond
 was up 4.5 basis points to 4.129%. 
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was up 2.5 basis
points at 4.353%. 
    Richmond Federal Reserve President Thomas Barkin said a soft
landing is "increasingly conceivable" in a speech on Wednesday
but cautioned that risks remain. "That's why the potential for
additional rate hikes remains on the table," he said, with the
timing and pace of any rate cuts determined by whether inflation
continues to fall.
    
    January 3 Wednesday 9:15AM New York / 1415 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             5.24         5.3988    0.021
 Six-month bills               5.0475       5.2668    0.008
 Two-year note                 99-206/256   4.3533    0.025
 Three-year note               100-174/256  4.1268    0.028
 Five-year note                99-8/256     3.9658    0.042
 Seven-year note               98-136/256   3.9928    0.044
 10-year note                  104-32/256   3.9894    0.045
 20-year bond                  106-28/256   4.2895    0.042
 30-year bond                  110-144/256  4.1309    0.047
 

 (Reporting by David Randall; editing by Barbara Lewis)