(Adds quote, updates prices) By Karen Brettell NEW YORK, July 13 (Reuters) - The U.S. Treasury yield curve flattened on Tuesday after data showed that consumer prices rose more than expected in June, raising fears that rising price pressures may lead the Fed to tighten policy sooner than expected. U.S. consumer prices rose by the most in 13 years in June amid supply constraints and a continued rebound in the costs of travel-related services from pandemic-depressed levels as the economic recovery gathered momentum. The consumer price index increased 0.9% last month, the largest gain since June 2008, after advancing 0.6% in May. The so-called core CPI surged 4.5% on a year-on-year basis, the largest increase since November 1991, after rising 3.8% in May. "Yet another blowout inflation reading makes it increasingly difficult for the Fed to stick to its position that elevated inflation readings are merely "transitory"," James Knightley, chief international economist at ING, said in a report. Benchmark 10-year yields jumped to 1.390% on the data, before falling back to 1.349%. Two-year yields, which are highly sensitive to interest rate expectations, increased to 0.251%, from 0.228%. The yield curve between two-year and 10-year notes flattened to 110 basis points. Fed Chair Jerome Powell is likely to be asked about the data when he testifies before Congress on Wednesday and Thursday and his comments will be evaluated for any indications that he is becoming more concerned about rising price pressures. “There is certainly some concern that some of these price increases are coming in much quicker than expected, but you can argue that a lot of this is due to the recovery,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. Minutes from the Fed’s June policy meeting released last week showed that Fed officials last month felt substantial further progress on the U.S. economic recovery "was generally seen as not having yet been met," but agreed they should be poised to act if inflation or other risks materialized. Fed funds futures are pricing in a 90% chance of an interest rate hike in Dec. 2022 and a 100% chance of a hike in Jan. 2023. The Treasury will sell $24 billion in 30-year bonds on Tuesday, the final sale of $120 billion in coupon-bearing supply this week. July 13 Tuesday 9:57AM New York / 1357 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 0.000 Six-month bills 0.0525 0.0532 0.002 Two-year note 99-193/256 0.2508 0.018 Three-year note 99-192/256 0.459 0.029 Five-year note 100-74/256 0.8154 0.019 Seven-year note 100-232/256 1.1143 -0.002 10-year note 102-136/256 1.3493 -0.014 20-year bond 105-236/256 1.8905 -0.026 30-year bond 109-56/256 1.9651 -0.028 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.50 0.25 spread U.S. 3-year dollar swap 9.50 -2.00 spread U.S. 5-year dollar swap 7.50 -0.50 spread U.S. 10-year dollar swap -1.00 -0.25 spread U.S. 30-year dollar swap -27.25 0.25 spread (Reporting by Karen Brettell; Editing by Andrea Ricci) Our Standards: The Thomson Reuters Trust Principles.