TREASURIES OUTLOOK-U.S. yields hold onto gains as inflation firms

* June core CPI increases within expectations

* Treasury sells $14 bln 30-year bonds in third day of auctions

* Fed's Powell not ready to declare victory on inflation

(Repeats to additional subscribers) NEW YORK, July 12 (Reuters) - U.S. Treasury yields edged higher on Thursday as economic data showed U.S. inflation buildup remained modest and labor markets were strong, reinforcing expectations the Federal Reserve will maintain its rate increase schedule. The consumer price index (CPI) rose 0.1 percent in June, slightly less than analysts had forecast. The CPI core rate, which better reflects the underlying inflation trend, came in at 0.2 percent month-over-month and 2.3 percent year-over-year, in line with expectations of economists polled by Reuters.

The CPI readings supported the view that inflation is near the Federal Reserve's 2-percent goal. Federal Reserve Chairman Jerome Powell said in an interview on National Public Radio's Marketplace program that he was "not declaring victory" over inflation after meeting the Fed's 2 percent target. "(The economic data) all fits within the within the context of firming inflationary trends with an extended economic expansion. And it's really fitting within that thesis of why the Fed has continued to raise short-term rates and is likely to continue to do so throughout this year," said Bill Northey, senior vice president at U.S. Bank Wealth Management in Helena, Montana. The Treasury sold $14 billion worth of 30-year bonds , wrapping up three days of auctions that increased coupon-bearing government debt by $69 billion. Benchmark 10-year Treasuries yielded 2.853 percent, pulling the price down 2/32 of a point by 3:52 p.m. (1952 GMT). U.S. 2-year note yields earlier reached 2.602 percent, matching a level seen a month ago that was the highest since August 2008. They have since dipped back to 2.594 percent. The spread between 2-year and 10-year Treasuries fell to 25.50 basis points, its lowest level since mid-2007. "The yield curve has been flattening almost on a daily basis, and that's usually an indication that people need duration," said Tom di Galoma, managing director at Seaport Global Securities LLC in New York, noting the persistent bid for longer-dated Treasuries. July 12 Thursday 3:52PM New York / 1952 GMT Price

US T BONDS SEP8 145-11/32 -4/32 10YR TNotes SEP8 120-44/256 -3/32 Price Current Net Yield % Change

(bps)

Three-month bills 1.9375 1.974 0.013 Six-month bills 2.11 2.1622 0.020 Two-year note 99-210/256 2.5941 0.016 Three-year note 99-216/256 2.6796 0.011 Five-year note 99-106/256 2.7519 0.012 Seven-year note 99-140/256 2.822 0.010 10-year note 100-52/256 2.8509 0.007 30-year bond 103-120/256 2.9493 0.005 YIELD CURVE Last (bps) Net

Change (bps)

10-year vs 2-year yield 25.50 -1.20 30-year vs 5-year yield 19.60 -0.40

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 23.00 -0.50

spread

U.S. 3-year dollar swap 19.75 0.25

spread

U.S. 5-year dollar swap 13.75 -0.25

spread

U.S. 10-year dollar swap 6.75 -0.25

spread

U.S. 30-year dollar swap -3.25 0.25

spread

(Reporting by James Thorne; Editing by Daniel Bases and Nick Zieminski)