(Updated at 2:08 p.m. ET/1808 GMT)

By Chuck Mikolajczak

NEW YORK, June 10 (Reuters) - U.S. Treasury yields were

mostly higher on Monday as investors awaited key inflation data

and the Federal Reserve's policy announcement later in the week,

following a stronger-than-expected jobs report on Friday.

Yields jumped on Friday following the payrolls report from

the Labor Department, reversing declines earlier in the week

after other data indicated the labor market could be cooling.

On Wednesday morning consumer price index (CPI) data will be

released. Signs that inflation may be easing could alter market

expectations for the Fed's path of interest rates.

The central bank is scheduled to release its policy

statement on Wednesday afternoon at the close of its two-day

meeting and will also give its economic projections.

"Within an environment where investors really don't know

which way this is heading, people are really getting anxious for

the Fed meeting," said Jim Barnes, director of fixed income at

Bryn Mawr Trust in Berwyn, Pennsylvania.

"It seems that everybody is itching for a rate cut, but it's

not justified as of yet. And so they're clinging on Wednesday

morning, CPI data, hoping that'll give us more direction and

additional commentary from the Fed later on that afternoon,

trying to get some clarity."

The yield on the benchmark U.S. 10-year Treasury note

on Monday rose 4.3 basis points to 4.471%.

The yield on the 30-year bond gained 4.9 basis

points to 4.597%.

The Fed is widely expected to keep rates steady at this

week's meeting, while the probability of a cut of at least 25

basis points at the September meeting is roughly 50%, according

to CME's FedWatch Tool, down from nearly 60% a week ago, as the

strong jobs report raised some uncertainty about the timing of a

rate cut.

Ahead of the Fed meeting, bond investors, worried about

persistently sticky inflation, have reduced their exposure to

longer-dated U.S. Treasuries.

An auction of $58 billion in three-year notes on Monday

was described as weak by analysts, with a below-average demand

of 2.43 times the notes on sale and a high yield of 4.659%.

The U.S. Treasury Department will also sell $39 billion in

10-year notes on Tuesday and $22 billion in 30-year bonds on

Thursday.

A closely watched part of the U.S. Treasury yield curve

measuring the gap between yields on two- and 10-year Treasury

notes, seen as an indicator of economic

expectations, was at a negative 41.88 basis points.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations, edged 1.7 basis

points higher to 4.887%.

The breakeven rate on five-year U.S. Treasury

Inflation-Protected Securities (TIPS) was last at

2.304% after closing at 2.291% on June 7.

The 10-year TIPS breakeven rate was last at

2.314%, indicating the market sees inflation averaging about

2.3% a year for the next decade.