NEW YORK - U.S. Treasury yields rose on Monday as risk sentiment improved ahead of a busy week that will include minutes from the Federal Reserve's latest meeting and new supply of short- and intermediate-dated debt.

Longer-dated yields have dropped from 3-1/2 year highs as sharp declines in stocks increased demand for the safe haven debt, and as investors worry that the Fed's aggressive plans to hike rates will tip the economy into a recession.

However, stock markets may be boosted this week by month-end demand for portfolio rebalancing, said Michael Lorizio, senior fixed income trader at Manulife Investment Management. Wall Street's main indexes opened higher on Monday, helped by a bounce back in growth and bank stocks.

A sharp drop in inflation expectations as measured by inflation-linked bonds will be in focus, as it may reflect growing confidence that the Fed's hawkish plans to reign in rising price pressures will ultimately prove effective.

"It is at least one part of the mosaic that the Fed looks at in trying to evaluate where inflation expectations are, and right now to see TIPS breakevens pull back, I think that may give them some ammunition to say that inflation expectations are somewhat well anchored, at least by that one measure," Lorizio said.

Breakeven rates on five-year Treasury Inflation-Protected Securities (TIPS), a measure of expected average annual inflation for the next five years, were at 2.92% on Monday, after reaching a peak of 3.62% last month.

Minutes from the Fed's May meeting released on Wednesday are likely to show that the U.S. central bank remains committed to tightening policy at a rapid pace as it battles inflation that is rising at its fastest pace in four decades. Fed funds futures traders are pricing in 50 basis point rate increases for each of the Fed's June and July meetings, and a strong possibility of the same in September.

The Fed's benchmark rate is expected to rise to 3.03% by March, from 0.83% now. Fed Chair Jerome Powell will also speak on Tuesday. Benchmark 10-year notes were last up two basis points at 2.808%. Two-year note yields gained one basis point to 2.595%.

The yield curve between two-year and 10-year notes steepened one basis point to 21 basis points. The yield curve could flatten if short- and intermediate-dated notes come under pressure as the Treasury Department sells $137 billion of the debt this week. This will include $47 billion in two-year notes on Tuesday, $48 billion in five-year notes on Wednesday and $42 billion in seven-year notes on Thursday.

(Reporting by Karen Brettell; Editing by Will Dunham)