(Adds details, quotes, updates prices)
* Prices fall as investors reposition following Fed
* Treasury sells $7 bln 30-year TIPS to weak demand
* Yield curve steepens as investors unwind flatteners
NEW YORK, June 19 (Reuters) - U.S. Treasuries prices fell on Thursday after the government had to pay more to sell $7 billion in new 30-year Treasuries Inflation-Protected Securities (TIPS). Prices also dropped as investors reworked positions, a day after the Federal Reserve struck a more dovish tone than expected at its June meeting. The TIPS were sold at a high yield of 1.116 percent, around 3 basis points higher than where the debt traded before the sale. "It was much weaker than we thought," said Rick Klingman, a Treasuries trader at Societe Generale in New York. The weakness came after bonds rallied on Thursday morning as investors covered bearish Treasuries positions made on expectations that the Fed would take a more hawkish tone on Wednesday. Stronger-than-expected consumer price data on Tuesday had led some investors to expect the Fed would hint towards interest rate hikes sooner than had been previously expected. "There's dislocations all across the curve from yesterday," said Tom Tucci, head of Treasuries trading at CIBC in New York. The longer-dated yield curve steepened on Thursday as investors unwound bets on further flattening taken before the Fed meeting, and added bets that it may climb further. The curve between 5-year notes and 30-year bonds steepened to 177 basis points, up from a five-year low of 165 basis points on Monday. Benchmark 10-year notes fell 11/32 in price to yield 2.63 percent, after earlier falling as low as 2.57 percent. Five-year notes dropped 2/32 in price to yield 1.69 percent, up from 1.65 percent earlier. Thirty-year bonds tumbled 1-6/32 in price to yield 3.47 percent, up from 3.40 percent. The Fed bought $2.51 billion in notes due from 2022 to 2024 on Thursday. The Treasury said it will sell $94 billion in new two-year, five-year and seven-year notes next week.
(Editing by Jan Paschal and Nick Zieminski)