TREASURIES-Yields mixed as Fed keeps rates steady

(Updates yields, adds Fed details) By Karen Pierog and Yoruk Bahceli March 17 (Reuters) - U.S. Treasuries yields on the longer end of the curve remained elevated, while yields on shorter-term debt fell on Wednesday after the Federal Reserve projected a bigger jump in economic growth with no interest rate hikes through 2023. The benchmark 10-year yield, which surged ahead of the Fed's statement to 1.689%, the highest level since January 2020, was last up 2.5 basis points at 1.6479%. The 30-year bond yield, which jumped after the statement's release to 2.464%, the highest since August 2019, was last up 3 basis points at 2.4212%. The U.S. central bank projected U.S. economic growth of 6.5% this year as the COVID-19 crisis winds down, up from the 4.2% projection at its December meeting. It also repeated its pledge to keep its target interest rate near zero for years to come. "There's no indication that the Fed is preparing to act on rising inflation or the stronger economy we've been seeing," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco. Expectations that the $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. Rupert pointed out that long-term yields might have had "a knee-jerk reaction" move higher due to an increasing number of Federal Open Market Committee (FOMC) members eyeing a rate hike in 2022 or 2023. Seven of 18 officials now expect to raise rates in 2023, compared to five in December. Four officials feel rates may need to rise as soon as next year, a change from zero as of the last projections in December. Fed Chair Jerome Powell told reporters not to read too much into the so-called dot plot, where FOMC members make projections for future interest rates. Eurodollar futures traders priced in a 90% chance of a Fed hike by March 2023 after the Fed statement, pushing back from December 2022. Traders still factored two additional rate increases in 2023, but the implied yields have come down a bit, suggesting a less firm conviction, compared with that before the Fed meeting. Powell also said it was too early to start talking about tapering Fed bond buying and that there would be advance notice ahead of such a move. In addition, the Fed announced it will conduct overnight reverse repurchase agreement operations with a per-counter party limit of $80 billion per day, up from $30 billion per day starting on Thursday. On the short end of the curve, yields on Treasury bills maturing in one, two, and three months fell earlier in the session to their lowest levels since March 2020, with the one-month yield sinking as low as 0.0100% and the three-month yield hitting 0.0150%. The two-year Treasury yield, which typically moves in step with interest rate expectations, was last 1.4 basis points lower at 0.137%. A closely watched part of the yield curve, which measures the gap between yields on two- and 10-year Treasury notes , steepened by about 4 basis points at 150.89 basis points. The spread between five-year notes and 30-year bonds , which widened to as much as 166.4 basis points in the wake of the Fed statement, was last up 6.85 basis points at 161.72 basis points. March 17 Wednesday 4:36PM New York / 2136 GMT Price Current Net Yield % Change (bps) Three-month bills 0.02 0.0203 0.002 Six-month bills 0.0475 0.0482 -0.003 Two-year note 99-250/256 0.137 -0.014 Three-year note 99-214/256 0.3051 -0.029 Five-year note 98-138/256 0.8015 -0.022 Seven-year note 98-248/256 1.2805 0.005 10-year note 95-60/256 1.6479 0.025 20-year bond 92-232/256 2.3219 0.023 30-year bond 88-108/256 2.4212 0.030 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 10.50 0.00 spread U.S. 3-year dollar swap 10.75 0.75 spread U.S. 5-year dollar swap 9.50 1.50 spread U.S. 10-year dollar swap 0.75 0.75 spread U.S. 30-year dollar swap -29.50 1.75 spread (Reporting by Karen Pierog in Chicago and Yoruk Bahceli in Amsterdam Additional reporting by Gertrude Chavez-Dreyfuss in New York Editing by Jonathan Oatis and Matthew Lewis)