(Recasts, updates yields, adds auction results and analyst comments) By Karen Pierog CHICAGO, March 16 (Reuters) - U.S. Treasury yields on the longer end of the curve rose on Tuesday despite strong demand for a 20-year bond auction, while uncertainty around the Federal Reserve"s two-day policy meeting sidelined some participants. The benchmark 10-year yield, which reached 1.642% on Friday, its highest level since February 2020, was last up 1.1 basis points at 1.6179%. The 20-year yield was last 1.9 basis points higher at 2.2952%. There was aggressive bidding for the $24 billion of 20-year bonds, according to Tom Simons, money market economist at Jefferies in New York. But he added that "once the results were digested, we went back to the same forces that have been pressuring the long end of the curve all this time," pointing to the prospect of additional heavy Treasury supply, general optimism about the economic recovery, and uncertainty ahead of the Fed"s end-of meeting announcement on Wednesday. The 20-year bonds were sold at a high yield of 2.290% with a bid-to-cover ratio, a gauge of demand, of a higher-than-average 2.51 to 1. Last month"s auction had a ratio of 2.15 to 1, the lowest since the maturity was relaunched in May 2020. Investors may have been deterred from joining that auction by rapid yield rises, according to Lou Brien, market strategist at DRW Trading in Chicago. "And now, even though rates are significantly higher ... it"s probably more orderly and allowing people to price the securities better," he said. Bill Merz, head of fixed income research at U.S. Bank Wealth Management in Minneapolis, said the market was pricing in "a reasonable chance" of rate hikes in 2022 against a backdrop of an improving economy aided by huge monetary and fiscal stimulus and accelerating vaccinations. "The market and expectations are moving ahead quite rapidly and the Fed is trying to hang onto their previous message that substantial progress is needed before they really change their policy," Merz said. The U.S. Commerce Department reported retail sales dropped by a larger-than-expected seasonally adjusted 3% in February amid bitterly cold weather. However, January"s 5.3% increase was revised up to 7.6%. Inflation expectations ticked higher with the breakeven rate on 10-year Treasury Inflation-Protected Securities (TIPS) rising above 2.3% for the first time since July 2014. The breakeven rate for 30-year TIPS hit 2.24%, the highest since September 2014. The two-year Treasury yield, which typically moves in step with interest rate expectations, was last less than a basis point lower at 0.151%. A closely watched part of the yield curve, which measures the gap between yields on two- and 10-year Treasury notes , steepened by about 2 basis points at 147.07 basis points. March 16 Tuesday 3:08PM New York / 2008 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0175 0.0177 -0.007 Six-month bills 0.05 0.0507 -0.005 Two-year note 99-243/256 0.151 -0.002 Three-year note 99-194/256 0.3313 -0.008 Five-year note 98-114/256 0.8209 -0.009 Seven-year note 99-6/256 1.2722 -0.002 10-year note 95-128/256 1.6179 0.011 20-year bond 93-80/256 2.2952 0.019 30-year bond 89-36/256 2.3848 0.017 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 10.50 0.50 spread U.S. 3-year dollar swap 10.25 0.50 spread U.S. 5-year dollar swap 8.25 0.25 spread U.S. 10-year dollar swap 0.00 -1.00 spread U.S. 30-year dollar swap -31.25 -0.50 spread (Reporting by Karen Pierog; Editing by Dan Grebler)