TREASURIES-Yields climb as market awaits Fed statement

Changes dateline to Chicago, updates yields, adds analyst comment

CHICAGO, March 17 (Reuters) - The U.S. 10-year Treasury yield hit a new 13-month high on Wednesday as the market awaited the Federal Reserve's latest policy statement for clues on the central bank's stance on interest rates.

The benchmark yield US10YT=RR surged to 1.676%, the highest level since February 2020. It was last up 2.8 basis points at 1.6515%.

The 30-year bond yield jumped to 2.429%, the highest since November 2019. It was last up 2.1 basis points at 2.4117%.

Federal Reserve officials are due to issue new economic projections after their two-day meeting ends later on Wednesday. nL1N2LE27R

Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research in New York, said the market may be overreacting a little given the Fed's focus on unemployment and the fact the economy has not yet fully reopened after the coronavirus pandemic forced massive closures.

"It's a reasonable move on the part of the market to see higher yields both in nominal and real terms because the economy is doing better than expected," she said. "But I don't know that I expect the Fed to move very much yet because (Fed Chair Jerome) Powell has said many, many times emphatically that the focus is really on unemployment and that hasn't made as much progress as the Fed would like to see."

She added that one potential outcome could involve the Fed's so-called "dot plot," where Federal Open Market Committee members make projections for future interest rates.

"Some of the dots in the dot plot could move to indicate more members in favor of hike in 2023 instead of 2024 and that would signal tightening sooner rather than later," Jones said.

Prospects that a $1.9 trillion U.S. fiscal stimulus package will boost economic growth and cause inflation to rebound have pushed government bond yields higher in recent weeks.

Inflation expectations have ticked higher with the breakeven rate on 10-year Treasury Inflation-Protected Securities (TIPS) US10YTIP=RR rising above 2.3% on Tuesday for the first time since July 2014.

The two-year Treasury yield US2YT=RR, which typically moves in step with interest rate expectations, was last less than a basis point higher at 0.1551%.

A closely watched part of the yield curve, which measures the gap between yields on two- and 10-year Treasury notes US2US10=RR, steepened by 2.77 points at 149.64 basis points.

March 17 Wednesday 10:28AM New York / 1428 GMT

	Price	Current Yield %	Net Change (bps)
Three-month bills US3MT=RR	0.02	0.0203	0.002
Six-month bills US6MT=RR	0.0525	0.0532	0.002
Two-year note US2YT=RR	99-241/256	0.1551	0.004
Three-year note US3YT=RR	99-188/256	0.3393	0.005
Five-year note US5YT=RR	98-88/256	0.8422	0.018
Seven-year note US7YT=RR	98-208/256	1.3042	0.028
10-year note US10YT=RR	95-52/256	1.6515	0.028
20-year bond US20YT=RR	93	2.3157	0.017
30-year bond US30YT=RR	88-156/256	2.4117	0.021
DOLLAR SWAP SPREADS
	Last (bps)	Net Change (bps)
U.S. 2-year dollar swap spread	10.50	0.00
U.S. 3-year dollar swap spread	10.50	0.50
U.S. 5-year dollar swap spread	8.50	0.50
U.S. 10-year dollar swap spread	0.00	0.00
U.S. 30-year dollar swap spread	-31.25	0.00

(Reporting by Karen Pierog in Chicago, additional reporting by Yoruk Bahceli in Amsterdam, Editing by Iain Withers and Nick Zieminski)

((karen.pierog@thomsonreuters.com; +1 312 408 8647; Reuters Messaging: karen.pierog.thomsonreuters.com@reuters.net))