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imageNEW YORK: US Treasury yields fell on Tuesday as Greek Prime Minister Alexis Tsipras lashed out at Greece's creditors, increasing demand for safe-haven debt as investors worried that the country could default on its loans and leave the euro.

Tsipras accused the country's lenders of trying to "humiliate" Greeks. Greece is set to default on a 1.6 billion euro ($1.80 billion) debt repayment to the International Monetary Fund on June 30 unless it receives fresh funds by then.

Yields also dropped as investors anticipated that the Federal Reserve is likely to lower its forecasts on the economy and the federal funds rate, known as the "dot plot," when it concludes its two-day meeting on Wednesday.

"Europe is the number one driver, and then people are rethinking about where the Fed actually is," said Tom Tucci, head of Treasuries trading at CIBC in New York.

Better-than-expected jobs gains in May, and signs of wage inflation, has increased speculation that the US central bank is likely to begin raising interest rates in September, with some investors and analysts also expecting a second hike in December.

But traders are also expecting that the Fed will lower forecasts for 2016 and 2017, which may keep interest rates lower than previously expected.

"People still think they will be keeping rates lower for longer over time," Tucci said.

Benchmark 10-year notes were last up 11/32 in price to yield 2.32 percent, down from 2.36 percent late on Monday.

Investors are also focused on whether the Fed will change language in the statement about ongoing slack in the labor market, after May's employment report.

"There is a phrase in the beginning of the statement where they characterize ongoing slack in the labor market that may be revised," said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.

Copyright Reuters, 2015

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