(Updated at 2:56 p.m. ET/1856 GMT)

By Chuck Mikolajczak

NEW YORK, July 22 (Reuters) - U.S. Treasury yields

inched higher on Monday, as markets assessed the uncertainty

surrounding the race for the White House after President Joe

Biden dropped his bid for reelection.

Vice President Kamala Harris was moving swiftly to try to

lock up the Democratic presidential nomination and secured the

support of former House Speaker Nancy Pelosi, while nearly all

of the prominent Democrats who had been seen as potential

challengers to Harris have lined up behind her.

"That's been the big question mark hanging over the markets;

a lot of people in the Treasury market were working towards that

understanding that Biden was going to drop out. I'm not terribly

surprised there's not some kind of huge upheaval in the rate

structure and term structure," said Thomas Urano, co-chief

investment officer at Sage Advisory in Austin, Texas.

"More importantly, the Fed's playing a pretty clear role

here because we've had a solid view of inflation moving in their

direction, growth kind of decelerating, so the door's open for

the Fed to make some adjustments in the near future so that's

the other thing that's really got the Treasury market's

attention."

Yields have dropped in July as data showed signs of a

slowing labor market and easing inflation to bolster

expectations the central bank will cut interest rates this year.

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

rose 2.1 basis points to 4.26%.

The yield on the 30-year bond advanced 2.9 basis

points to 4.479%.

The Federal Reserve is scheduled to hold its next policy

meeting at the end of July, with markets pricing in only a

slight chance for a cut of at least 25 basis points (bps), while

largely expecting the central bank to reduce rates at its

September meeting, according to CME's FedWatch Tool.

Investors will eye the report on gross domestic product for

the second quarter on Thursday and personal consumption

expenditures (PCE) data for June on Friday for clues on the

Fed's interest-rate path.

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

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

, seen as an indicator of economic expectations, was

at a negative 26.7 basis points.

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

moves in step with interest rate expectations, edged up 1.6

basis points to 4.523%.

More supply will come to the market this week as Treasury

auctions $69 billion in two-year notes on Tuesday and $70

billion in five-year notes on Wednesday.

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

Inflation-Protected Securities (TIPS) was last at

2.192% after closing at 2.197% on July 19.

The 10-year TIPS breakeven rate was last at

2.29%, indicating that the market sees inflation averaging about

2.3% a year for the next decade.