TREASURIES-U.S. 10-year yields hit 8-week high as markets brace for Jackson Hole

* U.S. five-year note auction shows soft demand * Two-year yield at 10-week peak * Fed funds futures raise chances of 75-bps hike in September * Mixed U.S. data shows durables up, but pending home sales drop (Adds new comments, results of U.S. 5-year note auction; updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, Aug 24 (Reuters) - U.S. Treasury yields touched fresh multi-week highs on Wednesday, as investors squared up positions ahead of what could be a pivotal central bank gathering in Wyoming that could see the Federal Reserve reinforce its tightening stance meant to stamp out inflation. U.S. benchmark 10-year yields hit an eight-week peak, while the two-year yield, which tends to track interest rate expectations, rose to 10-week highs. The other maturities touched peaks of anywhere between five to eight weeks. A weak U.S. five-year auction also added to the bearish tone on Treasuries, lifting yields further. The Jackson Hole, Wyoming, symposium is this week's main event. Fed Chair Jerome Powell is scheduled to speak on Friday morning and investors expect him to strike a hawkish tone, as the market braces for another policy meeting next month that will raise rates by either 50 or 75 basis points (bps). "Powell will want to reiterate in every sense possible that there will not be an early pivot until inflation is in the rearview mirror," said Jim Vogel, senior rates strategist, at FHN Financial in Memphis. "The Fed is always hawkish. Right now, we don't think Powell will be necessarily more hawkish than anyone on the Fed has been been over the last three to four weeks." Fed funds futures have now priced in a 60% chance of a 75-bps rate hike next month, up from about 45% on Tuesday. The fed funds rate is seen hitting 3.6% by the end of the year . Data showing that new orders for U.S.-made capital goods increased in July, albeit at a slow pace, from the previous month had little impact on the bond market. Orders for non-defense capital goods excluding aircraft, a closely-watched proxy for business spending plans, rose 0.4% last month. These so-called core capital goods orders surged 0.9% in June. On the housing front, the National Association of Realtors reported that its Pending Home Sales Index, based on signed contracts, dropped 1.0% to 89.8 last month, the lowest since April 2020. Contracts have declined in eight of the last nine months. In afternoon trading, the yield on 10-year Treasury notes surged to eight-week highs of 3.126% and was last up 5.6 bps at 3.1095%. The yield on the 30-year Treasury bond hit an eight-week high of 3.33%. It was last up 6.6 bps at 3.321%. 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, remained inverted at 28 bps. This part of the curve, which typically predicts a recession, has been inverted for nearly two months. The two-year U.S. Treasury yield soared to a 10-week high of 3.392, and last up 4.7 bps at 3.382%. "There's some position-squaring going on and the market mood is a little bit more cautionary," said Ellis Phifer, managing director, fixed income research at Raymond James in Memphis, Tennessee. Also on Wednesday, the Treasury's auction of $45 billion in U.S. five-year notes had lackluster results. The five-year sale drew a high yield of 3.23%, lower than the expected rate at the bid deadline, suggesting investors wanted a premium to take on the note. The bid-to-cover ratio, also a gauge of demand, was 2.3, the lowest since Februay 2021. "Investors appear to be reluctant to buy the belly ahead of Friday's Jackson Hole speeches which will likely argue for a higher terminal rate," wrote Jefferies in a research note. August 24 Wednesday 2:57PM New York / 1857 GMT Price Current Net Yield % Change (bps) Three-month bills 2.7225 2.7797 0.011 Six-month bills 3.12 3.214 0.026 Two-year note 99-190/256 3.3844 0.049 Three-year note 99-66/256 3.3893 0.039 Five-year note 97-212/256 3.2296 0.049 Seven-year note 96-124/256 3.1942 0.053 10-year note 96-252/256 3.1039 0.050 20-year bond 97-108/256 3.5564 0.056 30-year bond 93-244/256 3.32 0.064 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 33.00 -4.50 spread U.S. 3-year dollar swap 13.50 -0.25 spread U.S. 5-year dollar swap 3.75 -0.75 spread U.S. 10-year dollar swap 7.75 0.25 spread U.S. 30-year dollar swap -29.75 0.50 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Nick Zieminski)