TREASURIES-U.S. 10-yr yield tops 1.5% level last seen in June

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(Updates with market activity) By Ross Kerber and Dhara Ranasinghe Sept 27 (Reuters) - U.S. Treasury yields resumed their march higher on Monday, with 10-year yields hitting their highest level in three months on solid economic data and signals the Federal Reserve is shifting toward a more hawkish policy. The 10-year Treasury yield rose as high as 1.516% in morning trading, its first time above 1.5% since June 29, before falling back as the higher rate drew in buyers. It was last up 1.9 basis points at 1.4802%, steepening a closely watched part of the yield curve. The benchmark note's yield rose almost 9 basis points last week, the fifth week of gains and the biggest weekly jump since March, as investors reacted to hawkish shifts by major central banks including the U.S. Federal Reserve and the Bank of England. Across the curve, most other Treasury yields were higher on the day on Monday with 30-year yields rising above 2% for the first time since mid-August. The yield on the two-year note, seen as an indicator of inflation expectations, was up less than a basis point at 0.2799% in afternoon trading. Demand during several Treasury Department auctions held on Monday was "solid," said BMO Capital Markets analyst Ben Jeffery, including on the sale of $60 billion of two-year notes and $61 billion of five-year notes. Wall Street began the last week of September and the quarter with investors backing value over growth on Monday as tech shares, hurt by the rising Treasury yields, weighed on the broader market. Analysts said the continued sell-off in bond markets was likely driven by position adjustments and a reassessment of the inflation outlook, after a strong Commerce Department report on durable goods on Monday contributed to traders' risk-on sentiment. Tom di Galoma, managing director of Seaport Global Holdings, said he expected rates to continue to move up during the last three months of the year, especially for longer-term paper, as Fed Chair Jerome Powell implements the central bank's program. "The Fed chair is as on-message as I have ever seen him," di Galoma said. The bond sell-offs pushed up 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. It was at 120 basis points, the most since early July and about two basis points higher than Friday's close. September 27 Monday 3:20PM New York / 1920 GMT Price Current Net Yield % Change (bps) Three-month bills 0.03 0.0304 -0.005 Six-month bills 0.0525 0.0532 0.002 Two-year note 99-180/256 0.2799 0.006 Three-year note 99-124/256 0.5506 0.006 Five-year note 98-230/256 0.9797 0.022 Seven-year note 98-234/256 1.2894 0.027 10-year note 97-228/256 1.4802 0.019 20-year bond 96-208/256 1.944 0.010 30-year bond 100-40/256 1.993 0.006 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.50 0.25 spread U.S. 3-year dollar swap 12.75 0.50 spread U.S. 5-year dollar swap 9.50 0.00 spread U.S. 10-year dollar swap 2.50 -0.25 spread U.S. 30-year dollar swap -24.25 -0.25 spread (Reporting by Dhara Ranasinghe and Ross Kerber; Editing by Andrea Ricci, Barbara Lewis and Jonathan Oatis) 

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