TREASURIES-Powell's upbeat economic view flattens U.S. yield curve

* Powell sees U.S. economy strengthening since December

* Powell downplays risk signaled by a flattening yield curve

* Powell sticks to Fed's gradual rate-hike stance

* U.S. durable goods fall again, consumer mood hits 17-year high

(Updates market action, adds quote) NEW YORK, Feb 27 (Reuters) - The margin between U.S. shorter- and longer-dated yields narrowed on Tuesday after Federal Reserve Chairman Jerome Powell said data since December pointed to a strengthening economy and his confidence had increased that inflation will rise. His outlook spooked traders who now fear the U.S. central bank might raise key short-term borrowing costs four times in 2018, one more rate increase than they had previously thought. A faster path of Fed rate hikes will likely keep a lid on longer-dated yields. Powell expressed his view during the question-and-answer section of his first semi-annual economic testimony as Fed chief before the House Financial Services Committee. "The view is that he reinforced the view of a March rate hike and added to expectations for a higher number of rate hikes going forward," said John Canavan, market strategist at Stone & McCarthy Research Associates in New York. Futures market implied traders have almost priced in the chances of the Fed's next rate increase at its March 20-21 meeting. Before Powell's Q&A, Treasury yields were lower on his prepared remarks for his House appearance, which suggested no departure from the Fed's current stance set by his predecessors, Janet Yellen and Ben Bernanke, analysts said. "The (Federal Open Market Committee) will continue to strike a balance between avoiding an overheating economy and bringing ... price inflation to 2 percent on a sustained basis," Powell said in prepared remarks. Powell will complete his semiannual testimony before the Senate Banking Committee on Thursday. The benchmark 10-year Treasury yield was 2.901 percent, up 4 basis points from late on Monday, while the two-year yield was 2.266 percent, over 3 basis points on the day. The rise in longer-dated yields was capped by safe-haven bids stemming from a sell-off on Wall Street as Powell's economic outlook stoked rate-hike worries. The spread between five-year and 30-year Treasury yields contracted by 3 basis points to 51 basis points. It remained above the decade low of 40 basis points reached on Feb. 1, Tradeweb data showed. Some analysts have been concerned the yield curve may eventually invert where shorter-dated yields are higher than longer-dated ones, which has often preceded previous U.S. recessions. In his House testimony, Powell, when asked, downplayed concerns about a curve inversion. "I don't look at the current yield curve situation as a problem," he said. On the data front, domestic durable goods orders fell 3.7 percent in January, more than what analysts had forecast. On the other hand, the Conference Board's gauge on U.S. consumer confidence rose more than expected in February to its strongest level since November 2000. February 27 Tuesday 3:19PM New York / 2019 GMT Price

US T BONDS MAR8 143-21/32 -18/32 10YR TNotes MAR8 120-108/256 -13/32 Price Current Net Yield % Change


Three-month bills 1.645 1.6749 -0.002 Six-month bills 1.83 1.8727 -0.002 Two-year note 99-248/256 2.266 0.036 Three-year note 99-128/256 2.4257 0.050 Five-year note 99-208/256 2.6653 0.060 Seven-year note 99-120/256 2.8342 0.057 10-year note 98-176/256 2.9026 0.044 30-year bond 96-184/256 3.1704 0.016 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 63.50 -0.10 30-year vs 5-year yield 50.50 -3.70


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 27.75 0.75


U.S. 3-year dollar swap 24.25 0.25


U.S. 5-year dollar swap 11.50 0.50


U.S. 10-year dollar swap 1.25 1.25


U.S. 30-year dollar swap -18.50 1.75


(Reporting by Richard Leong; Editing by Jonathan Oatis and Susan Thomas)