(Recasts with auction results, adds data, quotes, updates prices) By Karen Brettell NEW YORK, July 12 (Reuters) - U.S. Treasury yields edged lower on Monday after the Treasury Department saw solid demand for sales of new three-year and 10-year notes, and before a highly anticipated inflation release on Tuesday. The Treasury sold $38 billion in 10-year notes at a high yield of 1.371%, slightly below where the debt had traded before the auction. Yields had backed up ahead of the sale, which likely helped demand. The U.S. government also saw solid demand for a $58 billion sale of three-year notes, with the notes selling at a high yield of 0.426%, less than a basis point above where they had traded before the auction. Overall trading was uneventful, following a blistering rally last week that sent long-dated yields to their lowest levels in five months. Investors are focused on consumer price inflation data on Tuesday for any indications that price pressures may be embedding in the economy. The Federal Reserve has said that recent inflation increases are likely to be temporary. There is a “lack of commitment before CPI tomorrow,” Jim Vogel, an interest rate strategist at FHN Financial, said in a report. “Only retail sales on Friday is likely to be a bigger number.” Benchmark 10-year note yields were at 1.344%, after falling as low as 1.25% on Thursday, the lowest since Feb. 16. Thirty-year bond yields were 1.967%, after reaching 1.856% on Thursday, the lowest since Feb. 2. Economists polled by Reuters expect the consumer price data to show that core inflation increased by 0.4% in June, with a year-on-year increase of 4%. U.S. consumers expect the economy to continue its rapid resurgence from the COVID-19 pandemic over the next year, with forecasts for inflation, earnings, income growth and spending all increasing in June, according to a monthly survey released on Monday by the New York Fed. Treasury yields dropped quickly last week as investors worried that job growth will be slow and that the spread of new variants of COVID-19 could result in new business shutdowns. Analysts say that much of the move was likely technical, however, with investors covering short trades and investors pouring cash into Treasury exchange-traded funds (ETFs). Many investors were caught “offsides” said Tom di Galoma, a managing director at Seaport Global Holdings in New York. Now, “you’ve got some profit-taking that’s taking place,” he said. The 10-year yields have dropped from 1.544% on June 25 and 30-year yields are down from 2.177% over the same time frame. The Treasury will also sell $24 billion in 30-year bonds on Tuesday. Demand to make overnight loans to the Fed in exchange for Treasuries remained strong on Monday, with the Fed seeing $776 billion in demand in its reverse repurchase agreement operation. July 12 Monday 9:33AM New York / 1333 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0525 0.0532 0.000 Six-month bills 0.05 0.0507 -0.005 Two-year note 99-212/256 0.2127 -0.004 Three-year note 99-152/256 0.3899 -0.008 Five-year note 100-120/256 0.7785 -0.008 Seven-year note 101 1.1004 -0.012 10-year note 102-148/256 1.3443 -0.012 20-year bond 105-236/256 1.8906 -0.012 30-year bond 109-44/256 1.9671 -0.015 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.00 0.00 spread U.S. 3-year dollar swap 11.75 -0.25 spread U.S. 5-year dollar swap 8.25 -0.25 spread U.S. 10-year dollar swap -1.00 -0.75 spread U.S. 30-year dollar swap -28.00 0.00 spread (Editing by Sonya Hepinstall) Our Standards: The Thomson Reuters Trust Principles.