Leading economists have boosted their outlook for interest rates on benchmark Treasury debt in tandem with rising expectations for growth in the world's largest economy, a Reuters poll found on Friday. The forecasts for stronger growth came despite a disappointing U.S. payrolls report, which showed employers hired less workers than expected in December, although the unemployment rate ticked lower.

Today's (payrolls) report confirms our expectations for a frustratingly moderate recovery with continued risks and volatility -- engines of growth acceleration are missing from the current recovery, said Julia Coronado, senior economist at BNP Paribas in New York.

The median of forecasts from 17 of 18 primary dealers is for benchmark 10-year Treasury note yields to climb from the current level near 3.33 percent to 3.50 percent by the end of the second quarter of this year.

A similar poll conducted on December 14 had a median forecast of 3.35 percent for the same time frame, while a poll conducted on December 3 had a median forecast of a 3 percent 10-year yield by the middle of the year.

Expectations for growth rose marginally in the latest poll, with the median of forecasts from 17 primary dealers pegging annualized gross domestic product of 3.10 percent in 2011. The median in the December 14 poll was 3.05 percent, up from 3 percent in the December 3 poll. As a comparison, the most recent government estimate pegged economic growth at an annual rate of 2.6 percent in the third quarter of 2010.

Stronger growth was not expected to spur the Federal Reserve to boost interest rates any time soon however, with 15 of 17 primary dealers -- the 18 large banks that do business directly with the Fed -- saying the central bank will maintain rates at the current level near zero through all of 2011.

The Fed itself has repeatedly said it plans to hold interest rates in the current zero to 0.25 percent range for an extended period.

Two firms, Daiwa Securities and Deutsche Bank Securities, are forecasting the Fed will hike rates in the fourth quarter of this year to 0.50 percent.

Most of the economists do not expect the Fed to extend its current program of Treasury purchases, dubbed QE2, beyond the $600 billion of buying it has pledged through the middle of this year.

Twelve of 17 economists said the Fed will not expand or contract the program, while five economists said the central bank will expand or may expand the program. Three of the five pegged the size of the expansion at $400 billion.

Feelings were mixed about whether wrangling between Congress and the White House over raising the debt ceiling might weigh on Treasuries prices this quarter.

Eight of 13 economists who answered the question said they do not expect issues surrounding the debt ceiling to weigh on Treasuries in the current quarter.

Treasury Secretary Timothy Geithner has said the federal government by March 31 could bump up against the $14.3 trillion limit on the debt it is legally allowed to issue. Some U.S. Republicans have suggested tying an expansion of the debt limit to promises of government spending cuts.

Congress has to raise the ceiling -- the choices are raising the ceiling or closing down the U.S. economy. They will play political games and posture and one party will try and gain at the expense of the other, but in the end they have to raise the debt ceiling and everyone knows they have to, said Michael Moran, chief economist at Daiwa Securities in New York.

Of the 18 primary dealers, Morgan Stanley did not respond to the poll.

(Additional reporting by Pam Niimi; Editing by )