(Corrects typographical error of 'Omicron' in headline and paragraph 3)
SYDNEY, Nov 29 (Reuters) - Treasuries and U.S. interest rate futures gave back some gains on Monday, after the detection of a new coronavirus variant had last week triggered the sharpest bond rally since the onset of the pandemic as panic-stricken investors rushed for safety.
The yield on benchmark 10-year U.S. government bonds rose about 6 basis points (bps) to 1.5414% in Asia on Monday, reversing just over a third of Friday's 16 bp plunge. Five-year yields rose 6.5 bps to 1.2338%.
Analysts said the emergence of the new variant, called Omicron, will likely keep investors on guard for a few weeks until more is known about its severity and response to vaccines.
How central banks might factor in its effects will be in focus ahead of economic data, unless the anxiety quickly ebbs.
"The bar for data to make any material impact on policy decision (one way or another) has been materially lifted," said Vishnu Varathan, head of economics at Mizuho in Singapore.
Two-year yields, which reflect short-term interest rate expectations, rose 4 bps to 0.5512% to hand back a bit of Friday's almost 14 bp drop which was the steepest daily fall since March 2020.
Fed funds futures also eased a fraction in fairly light Asia trade following a surge on Friday that pushed back U.S. rate hike expectations by a month or so.
"Markets have already taken out between 10 bp and 30 bp of hikes over the next few years in U.S., Australia, Canada and New Zealand curves on the back of Omicron news," said Royal Bank of Canada fixed income strategist Su-Lin Ong in Sydney.
"It's too early to tell whether this is worth fading, with the next few weeks being crucial as more data rolls in on the likely dangers posed by this new strain." (Reporting by Tom Westbrook Editing by Shri Navaratnam)