TREASURIES-Yields rise as Yellen warns about delaying rate hike

(Adds details on Fed expectations, quotes, updates prices)

* Yellen gives hawkish testimony before Senate

* 10-year yields highest in more than a week

By Karen Brettell

NEW YORK, Feb 14 (Reuters) - U.S. Treasury yields jumped on

Tuesday after Federal Reserve Chair Janet Yellen said it would

be unwise to wait too long to raise interest rates, striking a

more hawkish tone than investors expected.

The U.S. central bank will likely need to raise rates at an

upcoming meeting, Yellen said, although she flagged considerable

uncertainty over economic policy under the Trump administration.

Yellen said delaying rate increases could leave the Fed’s

policymaking committee behind the curve and eventually lead it

to hike rates quickly, which she said could cause a recession.

“What we are seeing is a down trade on the headline that

waiting too long to tighten monetary policy would be unwise. I

think that’s the biggest headline that everyone reacted to,"

said Ian Lyngen, head of U.S. rates strategy at BMO Capital

Markets in New York.

Benchmark 10-year notes were last down 10/32 in

price to yield 2.47 percent, after rising as high as 2.50

percent, the highest since Feb. 3, where the notes have

technical support.

The yield curve between five-year notes and 30-year bonds

flattened to 109 basis points, the lowest since

Feb. 1.

“The comment that it’s unwise to keep rates this low for

this long, that’s what everybody keyed in on and it just brought

the market down,” said Tom di Galoma, managing director at

Seaport Global Holdings.

Before the comments, “people weren’t necessarily sure she

was going to be hawkish and a lot of folk were buying the belly

and selling the long-end,” di Galoma said.

Intermediate-dated notes, which are also referred to as the

“belly” of the U.S. yield curve, typically underperform when

rate increases are viewed as more likely.

Traders are now pricing in an 18 percent chance of an

interest rate increase at the Fed’s March meeting, up from 13

percent on Monday, according to the CME Group (Kuala Lumpur: 7018.KL - news) ’s FedWatch Tool.

The chances of a hike by the Fed’s June meeting rose to 71

percent, from 65 percent.

Richmond Fed President Jeffrey Lacker also said on Tuesday

that the Fed will likely have to raise interest rates more

rapidly than financial markets currently expect given that any

new policies by the Trump administration, while uncertain, will

force the Fed's hand.

Yellen will also testify before the House Financial Services

Committee on Wednesday.

Economic releases, including consumer price inflation,

manufacturing and retail sales data, are also in focus this

week.

(Editing by Meredith Mazzilli and Cynthia Osterman)

)