(Adds afternoon pricing, comments) By Herbert Lash and Sujata Rao NEW YORK/LONDON, July 20 (Reuters) - Yields on 10-year Treasuries rebounded from five-month lows on Tuesday after the previous session"s biggest single-day decline since February, as traders scrambled to hedge positions amidst the unexpected rally in U.S. bond prices. The yield on the benchmark 10-year note has plunged almost 30 basis points in a week after the Federal Reserve persuaded investors data for June released July 13 showing the biggest jump of U.S. consumer prices in 13 years was transitory. The slide in yields has confounded investors, who say fundamentals suggest the 10-year Treasury will be trading by the end of this year to yield 2%, or almost double Tuesday"s lows. What appeared to be short-covering in mid-curve Eurodollars early in the session initially pulled long end yields down, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC. "In that sense, there"s not so much of a fundamental driver on 10-year yields, but rather a trading one," LeBas said. Ten-year Treasury yields rose 2.9 basis points to 1.210%, after tumbling to 1.128% earlier in the session. The yield on the 30-year Treasury bond gained 5.4 basis points to 1.869%. Trading was volatile. Ten-year Treasury yields overnight rose to nearly 1.22%. Yields on Monday declined as rising COVID-19 infections globally sparked concerns about the economic outlook and sent investors scrambling for safety in U.S. and German bonds, despite relatively robust economic data and corporate earnings. "Equity markets were pricing an explosion of growth and margins over the next two to three years and it"s clear now we won"t have that," said Ludovic Colin, senior portfolio manager at Vontobel Asset Management. Bond markets appeared too pessimistic in starting to price in a sharp downturn. "We don"t think we will have recession, just long-term growth that won"t be as beautiful as what was expected by investors in the January-March period," Colin said. The downward move has been led by the longer end of the market, flattening the yield curve significantly. Reflecting the growth concerns, the gap between two-year and 10-year yields remains below 100 basis points, having been at 122 bps at the start of July. The recent moves might be more than convexity hedging from holders of mortgage securities who are buying duration as well as receiving fixed-income swaps, said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. "But broadly speaking, this seems to be much more flow driven than just position unwinding," she said. The reversal on Treasuries boosted euro zone bonds too, with 10-year German yields extending their fall. They were last down 0.3 basis points at negative 0.415% Inflation-adjusted 10-year yields inched to minus 1.10%, not far off the record lows around minus 1.113% last touched in January. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 101.5 basis points. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 1.6 basis points at 0.194%. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.43%. The 10-year TIPS breakeven rate was last at 2.264%, indicating the market sees inflation averaging about 2.3% a year for the next decade. July 20 Tuesday 3:01PM New York / 1901 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 0.000 Six-month bills 0.05 0.0507 0.000 Two-year note 99-222/256 0.1935 -0.016 Three-year note 100-14/256 0.3566 -0.021 Five-year note 100-248/256 0.6754 -0.015 Seven-year note 101-226/256 0.9689 0.005 10-year note 103-212/256 1.2102 0.029 20-year bond 107-192/256 1.784 0.049 30-year bond 111-132/256 1.8694 0.054 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.00 1.00 spread U.S. 3-year dollar swap 9.25 0.50 spread U.S. 5-year dollar swap 7.00 1.00 spread U.S. 10-year dollar swap -1.75 0.75 spread U.S. 30-year dollar swap -30.75 0.75 spread (Reporting by Sujata Rao; editing by Nick Zieminski and Mark