TREASURIES-US yields pare gains after Fed statement

March 19 (Reuters) - U.S. Treasury yields pared earlier gains on Wednesday after the Federal Reserve held interest rates steady, as expected, while U.S. central bank policymakers indicated they still anticipate reducing borrowing costs by half a percentage point by the end of this year.

The Fed also said it will reduce the pace of the drawdown of its still-massive balance sheet, as it faces challenges in assessing market liquidity during an ongoing impasse over lifting the government’s borrowing limit.

The yield on benchmark U.S. 10-year notes US10YT=RR was last up 1.7 basis points on the day at 4.298%. The 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations, was up 1 basis point at 4.052%.

The yield curve between two-year and 10-year notes US2US10=TWEB was last at 24 basis points, little changed on the day.