TREASURIES-Prices flat, Bernanke in focus
* Prices flat before Wednesday's Bernanke testimony
* Yields temporarily rise on stronger than expected CPI
* Fed buys $1.46 billion in bonds due 2036-2043
NEW YORK, July 16 (Reuters) - U.S. Treasuries prices were flat on Tuesday before highly anticipated testimony from Federal Reserve Chairman Ben Bernanke on Wednesday, which will be watched for further details over when the U.S. central bank may reduce its bond purchases. Treasuries yields have surged since Bernanke said in June that the U.S. central bank may pare back its $85 billion per month program if the economic recovery continues its momentum. Bernanke is expected to stress on Wednesday that the Fed will hold rates low for a long time, in an effort to stem further volatility from its plans to reduce its unprecedented stimulus. "I think the central banks would like to get out of the bond-buying business and the way they are going to get out of it is by giving forward guidance that they are going to be extremely easy in the front end for a long period of time, which will anchor rates lower overall," said Tom Tucci, head of Treasuries trading at CIBC in New York. Bernanke's testimony will be released at 8:30 a.m. (1230 GMT) on Wednesday. Improving inflation data on Tuesday may help the Fed's message. The central bank has played down concerns over falling inflation as temporary, saying it expects price pressures to rise back to its 2 percent target. The Labor Department said on Tuesday its Consumer Price Index increased 0.5 percent in June, the largest increase since February, after nudging up 0.1 percent in May, though gasoline prices accounted for about two thirds of that. "A lot of the categories of CPI follow the Fed's script to a large extent," including an increase in medical inflation, said Aaron Kohli, an interest rate strategist at BNP Paribas in New York. "The bounce back was very strong and I think that adds to their thesis that a lot of the softness is transitory." U.S. homebuilder confidence also rose in July to its strongest in 7-1/2 years, adding to expectations the economy is turning around, data from the National Association of Home Builders released on Tuesday showed. Benchmark 10-year Treasuries yields have fallen from two-year highs of 2.76 percent on July 8 as officials have tried to soothe concerns over the pace of the Fed's actions. The question now will be whether Bernanke is comfortable with rates at current levels or whether he will try to talk yields down some more. Ten-year Treasuries yielded 2.55 percent on Tuesday, up from around 2.20 percent before Bernanke's comments on June 19 and from 1.60 percent at the beginning of May. "They managed to engineer a selloff from 1.60 percent to 2.60 percent quickly enough, now the question is are they happy with the levels right now," said Kohli. The Fed bought $1.46 billion in bonds due 2036 and 2043 on Tuesday as part of its ongoing purchase program.