* U.S. inflation rise slows in July * U.S. 10-year inflation breakeven rate up slightly * U.S. yield curve flattens after steepening for 4 straight days * U.S. 10-year note auction shows strong results (Adds new comment, 10-year note auction, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, Aug 11 (Reuters) - U.S. Treasury yields fell on Wednesday in choppy trading, after a strong 10-year note auction and data showing a slight moderation in consumer prices for the month of July in the world"s largest economy. U.S. 10-year yields dropped to session lows after the auction, falling from four-week peaks earlier in the session. The 10-year note picked up a high yield of 1.34%, much lower than the expected or when-issued rate of 1.375% at the bid deadline, suggesting investors were willing to buy the note at a much lower yield. The bid-to-cover ratio, a gauge of demand, was 2.65, compared to what analysts said was an average of 2.47. The robust 10-year note followed an equally solid U.S. 3-year note sale that was boosted by the recent decline in bond prices and persistent safe-haven demand amid the surge in global virus cases. The yield curve, a gauge of economic sentiment and rate move expectations, flattened to 109.30 basis points, as measured by the spread between two-year and 10-year yields. That curve had steepened in the four previous sessions. U.S. yields were a lot higher before the inflation data, bolstered by comments from two Federal Reserve officials on Tuesday, suggesting that the central bank could soon reduce or taper its asset purchases. Tapering tends to push Treasury debt prices lower and yields higher because it means the Fed is buying less of those bonds. U.S. consumer price increases slowed in July but inflation overall remained historically high. The consumer price index increased 0.5% last month after climbing 0.9% in June. Excluding the volatile food and energy components, the CPI rose 0.3% after increasing 0.9% in June. "A well-behaved CPI print arrived in timely fashion this morning to generate a buying burst not seen since July 30," said Jim Vogel, senior rates strategist, at FHN Financial, in a research note. "Moderate inflation for one month didn"t change the outlook so much as it allowed flows to balance at an old support level that eroded in light selling yesterday," he added. Gennadiy Goldberg, senior rates strategist, at TD Securities in New York, noted that the moderate rise in consumer prices should give the Fed confidence to let inflation run a little hotter than usual in the short term. In early afternoon trading, the yield on 10-year Treasury notes was down 2.2 basis points at 1.320%. Earlier in the session, the 10-year yield hit a four-week high of 1.378% The yield on the 30-year Treasury bond was up 0.4 basis points at 1.988%. The two-year U.S. Treasury yield, was down 2.1 basis points at 0.217%. The 10-year TIPS breakeven rate, the inflation average expected per year for the next decade, was at 2.4%, slightly up from 2.391% on Tuesday. Also on Wednesday, Dallas Fed President Robert Kaplan, who is currently not a voting member of the Fed policy committee, said the U.S. central bank should announce its timeline on starting the reduction of its massive bond holdings next month, and start tapering in October. August 11 Wednesday 1:40PM New York / 1740 GMT Price Current Net Yield % Change (bps) Three-month bills 0.05 0.0507 -0.005 Six-month bills 0.0525 0.0532 -0.003 Two-year note 99-210/256 0.2166 -0.021 Three-year note 99-204/256 0.4433 -0.032 Five-year note 99-42/256 0.797 -0.026 Seven-year note 99-84/256 1.1004 -0.023 10-year note 102-200/256 1.3202 -0.022 20-year bond 105-228/256 1.8912 -0.002 30-year bond 108-168/256 1.9882 0.004 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.50 0.00 spread U.S. 3-year dollar swap 9.25 -2.00 spread U.S. 5-year dollar swap 8.25 -0.25 spread U.S. 10-year dollar swap 0.75 -0.25 spread U.S. 30-year dollar swap -29.25 0.00 spread (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Karen Brettell in New York; Editing by David Evans, Elaine Hardcastle) Our Standards: The Thomson Reuters Trust Principles.