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TREASURIES-U.S. 2-year bond yield touches 9-year peak

NEW YORK, Dec 18 (Reuters) - U.S. two-year Treasury yield reached its highest level in more than nine years on Monday, prompted by expectations the Federal Reserve would raise interest rates further and short-term government borrowing would grow from possible federal tax cuts.

At 7:58 a.m. (1258 GMT), the yield on two-year government notes was 1.852 percent, up 1 basis points from late on Friday. This resulted in the gap between two-year and 10-year Treasury yields narrowing to 52 basis points, close to its flattest level in a decade, Reuters and Tradeweb data showed.

(Reporting by Richard Leong Editing by Chizu Nomiyama)