(Updates with latest market activity throughout)

By Matt Tracy

Sept 24 (Reuters) - U.S. Treasury yields inched higher

on Wednesday, driven by higher corporate and government bond

supply, a day after Federal Reserve Chair Jerome Powell signaled

caution around the U.S. central bank's next interest rate

decision.

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

hit its highest since September 5 on Monday and was last up 1.7

basis points at 4.136%.

The 30-year bond yield was last up 1 bp from

Monday's close at 4.747%.

A handful of multibillion dollar high-grade corporate bond

offerings came to the market, including an

$18 billion six-part senior note package

from U.S. software maker Oracle. Analysts at BMO Capital

Markets noted that deal by itself will push September supply

well over the $178 billion record scored in September last year.

"Wednesday's weakness was more about the technicals and

weight of supply (in both corporate and Treasury bonds) than the

evolution of investors' views of the macro fundamentals," Vail

Hartman, an analyst on the U.S. rates strategy team at BMO, said

in an interview.

Government bond supply on Wednesday was driven by an

auction of $70 billion in five-year notes, which

followed Tuesday's $69 billion two-year auction. The

five-year auction had a 2.34x bid-to-cover ratio, while

Tuesday's two-year auction saw a 2.51x bid-to-cover, as dealer

demand for new paper has appeared light in recent auctions.

"Primary Dealers ended up with 11.5% of the total, which is

closer to the upper end of the recent range, and that reinforces

the idea that the demand for this sale was relatively light,"

said Lou Brien, economic strategist at DRW Trading Group, in a

written note.

The Treasury Department will auction $44 billion in

seven-year notes on Thursday.

The two-year yield, which typically reflects

interest rate expectations, was last down 3.6 bps from Tuesday's

close at 3.598%. It hit a three-week high of 3.6% in afternoon

trading on Monday.

The general direction of two-year yields over the last few

sessions appears to show the market is "leaning into the

arguments of the hawks in the wake of the FOMC," noted BMO's

Hartman.

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

measuring the gap between two- and 10-year Treasury notes

, seen as an indicator of economic expectations,

was last at 54.1 bps.

Yields rose last week despite the Fed's 25-basis-point rate cut

and its signal for more easing at future meetings. They declined

on Tuesday after Powell, in a speech, cited the danger of

cutting rates too quickly and risking a new surge of inflation.

Market participants are looking to further data showing the

direction of inflation and the job market for clues to the

likelihood of a further rate cut at the Fed's October meeting.

Markets are pricing in a 94% chance of a 25 bps cut in

October following Powell's Tuesday speech, and 6% odds of a

pause. U.S. rate futures have also priced in 44 bps worth of

cuts through the end of the year, according to LSEG data.

Economic data has been sparse this week, but included S&P

Global's flash U.S. purchasing managers' index releases for

September, which pointed to a slowing picture for services and

manufacturing.

New home sales data will come on Wednesday morning. Market

participants are awaiting the Thursday release of the latest

initial jobless claims data for last week.