NEW YORK, Nov 29 (Reuters) - U.S. Treasury yields

dropped amid thin trading during the holiday-shortened market

session on Friday, extending a weekly bond rally spurred by

optimism about the new U.S. Treasury secretary and some respite

from inflation concerns.

Benchmark 10-year yields dipped to a month low, while two-

and thirty-year yields hit their lowest in three weeks, partly

because of holiday-week effects after Thanksgiving on Thursday

as well as month-end investor positioning.

The move lower in yields, which decline when prices rise,

indicated further unwinding of the trades linked to Donald

Trump's election, which had put downward pressure on bonds in

previous weeks because of expectations for higher deficits and

inflation during a second Trump presidency.

This week's rally began after Trump named Scott Bessent as

Treasury secretary last Friday and gained momentum after a

string of well-received Treasury auctions as well as inflation

data in line with estimates.

"Month-end positioning is likely to be playing a role,

particularly going into the long U.S. Thanksgiving weekend,

which is likely to have led to some increased demand for

Treasuries," said David Page, head of macroeconomic research at

AXA Investment Managers.

"Moreover, the market has taken the news that Trump will

appoint Scott Bessent as Treasury secretary, and this has

created a notional basis for a rally after a strong sell-off

over the last six weeks," he said.

In early trade on Friday, 10-year yields were

seen at around 4.2%, their lowest since Oct. 30. Two-year yields

, which more closely reflect monetary policy

expectations, stood at 4.186%, their lowest since Nov. 8.

"Its been a one-way slide lower in yield since the Asia

reopen, though light flows have magnified the moves to a

degree," analysts at Citi wrote in a note.

The closely watched curve comparing two- and 10-year yields

was last at 1.3 basis points, flatter than on

Thursday - meaning the premium of long-term yields over

shorter-ones was smaller.

That part of the curve inverted earlier this week for the

first time in over a month, with two-year yields briefly higher

than the 10-year. A curve inversion is a bond market signal of a

possible economic contraction in the future.

U.S. stock and bond markets will stay open for a half-day on

Friday. The sustainability of this week's decline in yields

might become clearer once the new month starts next week.

For Page at AXA Investment Managers the weeks ahead will

continue to be volatile as speculation mounts over the next U.S

administration's policies.

"Bonds look expensive to us at these yields," he said.