(Adds data, comments from Fed"s Kaplan, expansion of reverse repo facility, updates prices) By Karen Brettell NEW YORK, April 30 (Reuters) - U.S. Treasury yields fell on Friday as investors bought bonds for month-end portfolio rebalancing, countering expectations of higher inflation as businesses reopen from COVID-related shutdowns. “Right now it’s month-end rebalancing," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York, noting the next major market catalyst will be next Friday"s jobs report for April. Yields have held under one-year highs reached last month as market participants wait to see if there are more indications that inflation will rise as economic growth accelerates. Yields rose to two-week highs on Thursday after data showed that gross domestic product increased at a 6.4% annualized rate last quarter. That was the second-fastest GDP growth pace since the third quarter of 2003 and followed a 4.3% rate in the fourth quarter. The yields fell back down in the afternoon, however, and are now trading in the middle of their recent range. “The market has been looking for a reason to push forward further with the reflationary macro narrative, and when we stalled out after the GDP numbers I think the market just said ok, well that has proven insufficient to recast the macro narrative so we’re range-bound,” said Lyngen. Benchmark 10-year yields fell one basis point to 1.629%. They have risen from 1.531% last week but are holding below one-year highs of 1.776% reached in March. Inflation expectations fell on Friday despite data showing that U.S. consumer spending rebounded in March amid a surge in income as households received additional COVID-19 pandemic relief money from the government. Other data on Friday showed labor costs jumped by the most in 14 years in the first quarter, driven by a pick-up in wage growth as companies competed for workers to boost production. Breakevens on 10-year Treasury Inflation-Protected Securities are pricing in average annual inflation of 2.41% for the next decade, after reaching an eight-year high of 2.46% on Thursday. Inflation expectations increased after President Joe Biden on Wednesday proposed $1.8 trillion in new spending on education and childcare, which would be financed by raising the top marginal tax rate for the wealthiest Americans. That is on top of a $2 trillion jobs-and-infrastructure plan to be paid for by raising taxes on U.S. companies. Dallas Federal Reserve Bank President Robert Kaplan on Friday called for beginning the conversation about reducing central bank support for the economy, warning of imbalances in financial markets and arguing the economy is healing faster than expected. His comments come after Fed Chair Jerome Powell on Wednesday said that it was too soon to discuss tapering. Next Friday’s employment report for April is expected to show strong labor market improvement. The Treasury Department will also next week announce its refunding plans for the coming two quarters. Yields on Treasury bills held near zero as money markets struggle with a surge in demand for short-dated assets, and a shortage of bills as the Treasury curbs bill issuance and pays down its cash balance. The Treasury sold $40 billion in four-week notes at a zero yield on Thursday for the first time since last March. The bill yields were last trading at 0.005. The New York Fed on Friday said that it will loosen the eligibility requirements for its reverse repo facility, expanding access to the program at a time when it is seeing higher demand from institutions coping with excess cash. The cost to borrow Treasuries in the overnight repurchase agreement (repo) markets was one basis point, after falling to zero on Thursday. April 30 Friday 3:05PM New York / 1905 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0125 0.0127 0.000 Six-month bills 0.025 0.0254 -0.005 Two-year note 99-237/256 0.1623 -0.004 Three-year note 100-30/256 0.335 -0.005 Five-year note 99-124/256 0.8557 -0.011 Seven-year note 99-144/256 1.3157 -0.009 10-year note 95-116/256 1.6294 -0.011 20-year bond 95-32/256 2.1795 -0.014 30-year bond 90-228/256 2.299 -0.011 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.75 0.25 spread U.S. 3-year dollar swap 14.25 0.25 spread U.S. 5-year dollar swap 9.50 0.75 spread U.S. 10-year dollar swap -0.25 -0.25 spread U.S. 30-year dollar swap -26.00 0.00 spread (Editing by Nick Zieminski and Sonya Hepinstall)