TREASURIES-Prices flat after retail sales disappoint
* Prices erase earlier losses on weak retail sales data
* Fed to buy $750 million to $1 billion bonds due 2023-2031
* Bernanke Congressional testimony on Wednesday next focus
NEW YORK, July 15 (Reuters) - U.S. Treasuries erased their earlier weakness on Monday after U.S. retail sales rose less than expected in June, signaling that growth in the second quarter of this year may be more disappointing than previously expected. The Commerce Department said retail sales increased 0.4 percent last month as demand for automobiles soared, though sales of building materials fell. Economists polled by Reuters had forecast retail sales, which account for about 30 percent of consumer spending, rising 0.8 percent after a previously reported 0.6 percent gain in May. "It was a softer month and there was a downward revision to the previous month," said Michael Cloherty, head of U.S. rates strategy at RBC Capital Markets in New York. The data is unlikely to affect a decision by the Federal Reserve to reduce its bond purchases this year, however, Cloherty added. Treasuries yields have jumped to two-year highs since Fed Chairman Ben Bernanke said in June that the U.S. central bank may start paring back its bond purchases this year. Benchmark 10-year note yields were last 2.58 percent on Monday, after earlier rising as high as 2.64 percent before the retail sales data. The yields have increased from around 2.20 percent before Bernanke spoke on June 19 and reached a two-year high of 2.76 percent on July 8. A weaker economy may make it less likely that the Fed will reduce its buybacks, though data would likely have to turn significantly worse to affect the Fed's thinking. "It's not like you need to have the economy surging to get them to taper, you just need to have it not get dramatically weaker," Cloherty said. The Fed views the size of its bond holdings as having a stimulative impact on the economy by holding yields lower than they would otherwise be and the central bank is seen as unlikely to sell its holdings for some time. "We think buying will go into the second quarter of next year and so their portfolio will get a lot bigger," said Cloherty. The next focus for the market will be Bernanke's semi-annual testimony to Congressional committees this Wednesday and Thursday, which will be watched for further signs about the timing and speed of any reduction in bond purchases. The Fed will buy between $750 million and $1 billion in debt due from 2023 and 2031 on Monday as part of its ongoing purchase program.