Fed's Mester expects rate hike to boost longer-term U.S. yields

Yields on longer-term Treasuries have stayed low in recent weeks and months even while the Fed has telegraphed an interest rate hike later this year. Cleveland Fed President Loretta Mester said she expects at least "some reaction" in long rates once the central bank lifts its key short-term rate.

Addressing economists, Mester said the Fed would consider financial conditions as it decides how aggressively to tighten policy, but that it would not "react" outright to markets. She repeated she would be open to selling assets if, after rates liftoff, market yields don't rise enough.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)