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TREASURIES-U.S. yields rise before Yellen speech, two-year supply

* U.S. to sell $26 bln two-year notes at 1 p.m. (1700 GMT)

* Fed's Yellen to speak at 12:45 p.m. (1645 GMT)

* Trump offers hints on tax plan, raises borrowing concerns

(New throughout, updates prices, market activity and comments) NEW YORK, Sept 26 (Reuters) - U.S. Treasury yields rose on Tuesday ahead of a speech by Federal Reserve Chair Janet Yellen and a $26 billion sale of two-year notes, which kicks off this week's $88 billion short- and medium-dated government debt supply. Traders were waiting to hear whether Yellen will reinforce the notion the central bank will consider raising rates at its Dec. 12-13 policy meeting even as inflation remains below its 2-percent goal, analysts said. "It seems unlikely that Chair Yellens tone and core views will have changed dramatically from Wednesdays FOMC press conference," NatWest strategists wrote in a research note. Investors were also preparing for the upcoming supply of two-year Treasuries at 1 p.m. (1700 GMT). Yellen is scheduled to speak at 12:45 p.m. (1645 GMT) about "Inflation, Uncertainty, and Monetary Policy" at the National Association for Business Economics' annual conference in Cleveland. Last Wednesday, the policy making Federal Open Market Committee left the door open for another rate increase in December and said it will begin to reduce its $4.5 trillion balance sheet in October. The rise in U.S. yields was stoked further by remarks from U.S. President Donald Trump who said and lawmakers were working to pass a big tax cut for the middle class. Traders had no details on the plan, but speculated it might raise the federal deficit and increase government borrowing. "It should be positive for risky assets and negative for Treasuries," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York. "Frankly, there is a lot of skepticism until we see the details." At 11:49 a.m. (1549 GMT), the yield on benchmark 10-year Treasury notes was up nearly 2 basis points at 2.237 percent, while the 30-year bond yield increased over 2 basis points to 2.782 percent. Bond yields declined on Monday on safe-haven demand due to tensions between North Korea and the United States and surging support for the far right in Sunday's German election. Several other Fed officials are set to speak publicly, including Fed Governor Lael Brainard, Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic.

In "when-issue" activity, traders expected the two-year note issue to sell at a yield of 1.458 percent, which would be highest yield since October 2008, Tradeweb data showed. September 26 Tuesday 11:51AM New York / 1551 GMT Price

US T BONDS DEC7 154-17/32 -0-12/32 10YR TNotes DEC7 125-240/256 -0-32/25

6

Price Current Net Yield % Change

(bps)

Three-month bills 1.05 1.0674 0.043 Six-month bills 1.1675 1.1908 0.000 Two-year note 99-162/256 1.4439 0.017 Three-year note 99-108/256 1.5751 0.016 Five-year note 98-236/256 1.8549 0.019 Seven-year note 98-180/256 2.0769 0.017 10-year note 100-28/256 2.2375 0.017 30-year bond 99-92/256 2.7816 0.023

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 26.00 -0.50

spread

U.S. 3-year dollar swap 22.25 -0.25

spread

U.S. 5-year dollar swap 8.00 -0.50

spread

U.S. 10-year dollar swap -4.25 -0.50

spread

U.S. 30-year dollar swap -32.50 -0.50

spread

(Reporting by Richard Leong; Editing by Susan Thomas and David Gregorio)