* U.S. 5-year/30-year spread hits narrowest since late August 2020 * Investors focus on possible taper talk at Jackson Hole Fed gathering * Fed reverse repo volume hits record $765.14 billion By David Randall NEW YORK, June 21 (Reuters) - Falling inflation expectations briefly pushed yield spreads to their lowest levels in months before rebounding on Monday as investors continued to digest the Federal Reserve"s hawkish turn at its policy meeting last week. Economic projections released by the Fed on Wednesday showed that 11 of 18 policymakers expected at least two quarter-percentage-point interest rate hikes by the end of 2023. The prospect of those sooner-than-expected moves have pushed short-term yields higher while keeping longer-duration yields in check as market fears of out-of-control inflation subside. In a sign that investors expect the U.S. economy to expand over the long term, 30-year Treasury yields had their biggest jump since Jan. 6, while the spread between five- and 30-year Treasuries had its largest increase since March 24, 2020. Earlier in the session, the yield curve spread between five-year notes and 30-year bonds hit 107.80 basis points, its lowest level since August 2020, before ticking back to 121.90. The spread between two-year notes and 10-year Treasuries hit its lowest level since February before rising slightly to 118.93 basis points. "By bringing forward rate hikes, the Fed is providing a material headwind not only for any inflation that might not prove transitory but also growth as well. Needless to say, such a hawkish pivot is likely to remain topical for weeks to come – a reality further reinforced by the lack of meaningful economic data over the next several sessions," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. Two-year yields were flat at 0.2563%, while 10-year yields edged higher to 1.4853%. The two-year yield hit 0.284%, its highest level since April 2020, on Friday. Bond yields rise as prices fall. "It feels like the Fed"s modest moves last week basically got them in line with where the street was already. The bond markets seem to agree with that, as the yield on the U.S. 10-year ended the week below 1.5%," said Arthur Hogan, chief market strategist at National Securities. Meanwhile, the Federal Reserve"s reverse repurchase window on Monday took in a record $765.14 billion in cash, despite technical adjustments made by the Fed last week on the short-term interest rates it manages, in a sign there are few investment options available in a low-yield environment. The question of how and when the U.S. central bank will start tapering its monetary support will likely hang over the bond market until the central bank"s annual meeting at Jackson Hole, Wyoming in late August. St. Louis Fed President James Bullard said that the Fed"s methodical rundown of its bond purchases after the last economic crisis will likely not serve as a guide to how it should proceed this time given a more volatile inflation environment and a booming economy. Given the upcoming annual meeting at Jackson Hole, investors will be highly focused on what Fed members say over the coming week, said Ellis Phifer, managing director in fixed income research for Raymond James. Markets will be looking for "any change in attitude and character" that could suggest changes in the Fed"s support of the economy, he said. Price Current Net Yield % Change (bps) Three-month bills 0.04 0.0406 0.000 Six-month bills 0.0475 0.0482 -0.005 Two-year note 99-192/256 0.2563 -0.004 Three-year note 99-88/256 0.4719 -0.008 Five-year note 99-90/256 0.8844 -0.002 Seven-year note 100-24/256 1.2358 0.017 10-year note 101-80/256 1.4853 0.032 20-year bond 103-116/256 2.038 0.061 30-year bond 106 2.1036 0.076 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 6.75 0.25 spread U.S. 3-year dollar swap 7.75 0.00 spread U.S. 5-year dollar swap 5.00 0.00 spread U.S. 10-year dollar swap -4.25 0.00 spread U.S. 30-year dollar swap -33.00 -2.00 spread (Reporting by David Randall; Editing by Andrea Ricci) Our Standards: The Thomson Reuters Trust Principles.