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TREASURIES-Yield curve near almost 10-year lows on inflation concerns

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* Yield curve holds near flattest levels since 2007

* Fed's Mester says inflation declines likely temporary

* Fed's Bullard says further rate hikes should depend on inflation

NEW YORK, June 23 (Reuters) - U.S. Treasuries yields were little changed on the day on Friday and the yield curve held near its flattest levels in almost 10-years as expectations of low inflation continued to boost demand for longer-dated debt. The yield curve flattened this week as oil prices declined and concerns lingered over last weeks weaker-than-expected Consumer Price Index report. For the third month in a row, (CPI) was way below expectations, said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee, adding that continued declines in non-seasonally adjusted consumer prices played a large role in the market move. A decline in oil prices despite positive fundamentals added to concerns, Vogel said.

The yield curve was last at 96 basis points

after flattening to 95 basis points on Thursday, the lowest since December 2007.

Benchmark 10-year notes were unchanged on the

day in price to yield 2.15 percent. Expectations that the Fed will continue on its tightening course has weighed on short- and intermediate-dated notes, which are the most sensitive to central bank's policy, even as longer-dated debt rallied. New York Fed President William Dudley and Boston Fed President Eric Rosengren both took a hawkish tone this week on monetary policy, noting that pausing the tightening cycle could pose risks to the economy. Cleveland Fed President Loretta Mester added to the sentiment on Friday, saying that recent inflation weakness was likely temporary and it should not delay another interest-rate hike this year. St. Louis Fed President James Bullard, by contrast, said on Friday that the Fed should wait on any further rate increases until it is clear inflation is reliably heading to the Fed's 2 percent target. The Fed has emphasized the improving job market and an expectation that inflation will return to targets despite recent declines. The next major economic release, Junes employment report on July 7, will be watched for signs of further improvement in the labor force. If the Fed is going to continue to watch the employment rate while everyone else watches inflation, the Feds probably not going to veer off its course, said Vogel.

(Editing by Lisa Von Ahn and Grant McCool)

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