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TREASURIES-Yields rise as Fed's Dudley strikes hawkish tone

* Fed's Dudley: U.S. economy needs further tightening

* London terrorist attack boosts bonds overnight

* Five-year, 30-year yield curve flattest in three months

NEW YORK, June 19 (Reuters) - U.S. Treasury yields jumped to session highs on Monday after New York Federal Reserve President William Dudley struck a hawkish tone on monetary policy, raising expectations that the U.S. central bank will continue tightening. Dudley said that halting the tightening cycle now would imperil the economy, adding that with unemployment at 4.3 percent and inflation at about 1.5 percent, "this is actually a pretty good place to be. He said that it would be a mistake for the Fed to stop tightening now, said Mary Ann Hurley, vice president in fixed income trading at D.A. Davidson in Seattle. Generally Dudley has been one of the doves on the committee, so this would signal that the tightening agenda continues, Hurley said. Benchmark 10-year note yields jumped to as high as 2.18 percent on Dudleys comments, up from a low of 2.14 percent overnight. Prices had firmed overnight on safety buying after a van hit worshippers near a London mosque, adding to concerns about rising attacks. The 10-year notes were last down 4/32 in price to yield 2.17

percent .

The yield curve between five-year notes and 30-year bonds flattened to a three-month low of 100 basis points, as hawkish Fed policy weighed on intermediate-dated notes but long bonds were supported by tepid inflation. With no major economic releases or supply this week to sway market direction most investors were continuing to evaluate Fed policy. Yields have risen from seven-month lows since the Fed on Wednesday increased interest rates for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year. Bond weakness has been capped, however, by concerns about weak economic indicators. Data released before the Fed meeting on Wednesday showed U.S. consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months, suggesting a softening in domestic demand.

(Editing by Meredith Mazzilli)

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