* U.S. core PCE year-on-year rises 3.1% * Chicago PMI jumps in May * Month-end buying boosts Treasury prices, weighs on yields * U.S. 10-year breakeven inflation slips (Adds analyst comment, bullets, U.S. data, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, May 28 (Reuters) - U.S. Treasury yields fell on Friday in a shortened trading session on month-end buying by portfolio managers, with the market largely shrugging off a rise in U.S. core inflation above the Federal Reserve"s target. The bond market closes early ahead of the U.S. Memorial Day holiday weekend. Data on Friday showed that underlying inflation in the 12 months to April, as measured by the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, climbed to 3.1%, far above the Fed"s 2% target. On a monthly basis, though, the core PCE rose 0.7% in April, after gaining 0.4% in March. Wall Street economists expected a 0.6% rise in core PCE. "The market is clearly taking inflation in stride. The inflation numbers are not really adding to jitters," said Kim Rupert, managing director for fixed income at Action Economics in San Francisco. "The market believes the Fed that inflation is transitory. The bulls are having their way." Barclays estimates that its duration index extends out 0.13 years, versus the long run average of 0.09 years, according to Rupert, which means asset managers need to buy Treasuries to hit that index. In midday trading, the U.S. 10-year Treasury yield fell to 1.589% from 1.61% late on Thursday. U.S. 30-year yields dropped to 2.267% from Thursday"s 2.29%. U.S. yields briefly edged up from lows after business activity in the U.S. Midwest jumped more than expected in May, accelerating to its highest level since November 1973 according to a report on Friday. The Chicago Business barometer rose to 75.2 from 72.1 in April, according to MNI Chicago. The U.S. 10-year inflation breakeven, the bond market"s gauge of investors" price outlook over the next 10 years, was down at 2.436% from Thursday"s 2.44%. In mid-May, 10-year breakeven inflation hit 2.564%, the highest since March 2013. The White House on Friday will present President Joe Biden"s estimated $6 trillion budget with spending on infrastructure, education and other initiatives, but the plan is unlikely to sway Republicans who want to tamp down U.S. government spending. The $6 trillion figure, first reported on Thursday, caused a sell-off in Treasuries as this meant the government would have to flood the market with debt to finance the budget. May 28 Friday 12:14PM New York / 1614 GMT Price Current Net Yield % Change (bps) Three-month bills 0.015 0.0152 0.005 Six-month bills 0.0325 0.033 0.003 Two-year note 99-246/256 0.1446 -0.002 Three-year note 99-218/256 0.3005 -0.005 Five-year note 99-194/256 0.7995 -0.015 Seven-year note 99-240/256 1.2594 -0.020 10-year note 100-84/256 1.5892 -0.021 20-year bond 101-16/256 2.184 -0.017 30-year bond 102-84/256 2.2675 -0.023 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.25 0.25 spread U.S. 3-year dollar swap 12.50 0.50 spread U.S. 5-year dollar swap 7.75 1.00 spread U.S. 10-year dollar swap -3.50 0.50 spread U.S. 30-year dollar swap -28.50 0.75 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Kevin Liffey and Richard Chang) Our Standards: The Thomson Reuters Trust Principles.