March 21 (Reuters) - U.S. Treasury yields rose on

Thursday after the release of strong economic data, including a

report showing a drop in new claims for unemployment benefits

last week.

Yields on benchmark 10-year notes rose to

4.282%. They closed at 4.271% on Wednesday after the Federal

Reserve issued a policy statement and new economic projections

affirming that it was still on track to cut interest rates three

times this year.

Two-year yields ticked up to 4.629%, from their

close of 4.604% on Wednesday.

The inversion in the yield curve between two-year and

10-year notes narrowed by 4 basis points to minus

35 basis points.

The release of recent data, including reports showing

inflation is not falling as fast as had been hoped by Fed

policymakers, has raised questions among traders about the

widely expected June start to the U.S. central bank's rate cuts.

Fed Chair Jerome Powell said on Wednesday that despite

recent inflation data coming in hotter than expected, the

numbers "haven't really changed the overall story, which is that

of inflation moving down gradually, on a somewhat bumpy road."

A series of economic data reports on Thursday helped boost

yields. The U.S. Labor Department reported the number of people

filing new claims for unemployment benefits unexpectedly fell

last week, suggesting job growth remained strong in March. The

National Association of Realtors also reported that U.S.

existing home sales increased to a one-year high in February.

Traders in Fed funds futures have increased their bets that

the central bank will cut rates by June to 69.8%, according to

CME Group's FedWatch tool.

While further stronger-than-expected inflation prints could

change the Fed's course, Powell's dovish comments assuaged some

traders' concerns about the rate-cut plan.

"The timing and pace is what's a little frustrating, but as

long as it's moving in the right direction, the Fed should

remain on track for cuts this year," said Jack McIntyre,

portfolio manager for global fixed income at Brandywine Global.

"I feel like inflation has had a couple of little bumps and

that's to be expected. But I think, as we have a conversation

six months from now, inflation is still going to be well

behaved," he added.

The U.S. Treasury Department on Thursday will auction $85

billion in four-week bills and $85 billion in eight-week bills.