* Higher yields push demand in auction of seven-year notes
* Ten-year Treasury yield falls to two-week low
* Thirty-year yield hits three-week low (Recasts with results of auction; updates to U.S. market afternoon trading; adds quotes)
By Dion Rabouin
NEW YORK, Dec 29 (Reuters) - U.S. Treasury yields fell across the curve and most hit two-week lows on Thursday as investors bought safe-haven government debt after a strong seven-year note auction on the last full trading day of the year.
The high yield on the seven-year note sale was more than 2 basis points below the 1 p.m. when-issued level, according to Reuters data.
Analysts said the strong bid for seven-year paper, which followed a strong five-year note auction on Wednesday, was largely the result of an overzealous selloff that has gripped bond markets since the election of Donald Trump as U.S. president, boosting yields for newly issued Treasuries.
"The auctions were so well bid because the yield is so much higher," said Jennifer Vail, head of fixed-income research for US Bank Wealth Management in Portland, Oregon. "At the end of the day that's going to drive more dollars into any new issuance."
In addition to the impact of Trump's election victory, which has sent yields on U.S. 10-year Treasury notes from 1.83 percent on Nov. 8 to 2.51 percent at their open Thursday, Vail said year-end buying by investors to rebalance their portfolios has increased appetite for government debt.
The 10-year note was last up 8/32 in price to yield 2.48 percent. Yields earlier fell to 2.46 percent, their lowest level since Dec. 14.
Yields on 30-year Treasury bonds fell to a three-week trough of 3.06 percent after the auction. The long bond retraced that move later and was up 2/32 in price to yield 3.08 percent.
"I sense that people realize that longer-term bonds already took it on the chin and we may have gotten ahead of ourselves," said Karyn Cavanaugh, senior market strategist at Voya Investment Management in New York.
"Things are looking better for 2017 - we have the potential for a lot of pro-growth policies - but there are some risks and the best way to mitigate risk is with long-term Treasuries."
Investors will look to a full slate of U.S. inflation, manufacturing and employment data in the coming week, culminating in the Jan. 6 release of the monthly U.S. non-farm payrolls report.
The bond market will close at 2 p.m. Friday in advance of the New Year's holiday weekend. (Reporting by Dion Rabouin in New York; Editing by Dan Grebler and Leslie Adler)