LONDON, Oct 18 (Reuters) - Short U.S. Treasury yields resumed their upward march on Monday with five-year yields rising to their highest levels in 20 months as the combination of slowing growth and rising price pressures prompted hedge funds to ratchet up their short bets. Yields on benchmark five-year bonds rose to 1.18%, its highest levels since Feb 2020 extending a two consecutive week rising streak. While yields on 30-year U.S. bonds also crept higher, they rose lesser than the 4 bps move rise on the short-end of the curve. That flattened the gap between five-year and 30-year debt to its narrowest level since May 2020. A flattening bond yield curve is a sign that markets expect interest rates to rise in the coming months but the future economic growth outlook is becoming more cautious. Latest weekly positioning data showed hedge funds have increased their short bets on 2 and five year U.S. Treasuries while simultaneously increasing their bullish bets on 10-year debt, indicating investors expect this curve flattening trend to extend in the coming months. Yields on benchmark 10-year U.S. debt held at 1.61%, just below a June high of 1.63% hit last week. U.S. Treasuries had sold off last week on strong U.S. retail sales data and some hawkish comments from some Fed speakers but Jefferies analysts believe it encouraged some investors to add new short bets on U.S. bonds. U.S. retail sales rose 0.7% last month and data for August was revised higher to show retail sales increased 0.9% instead of 0.7% as initially reported by the Commerce Department. The 10-year TIPS breakeven rate was last at 2.56%, hovering near a five-month high indicating the market sees inflation averaging almost 2.6% a year for the next decade. Money markets now attach a 42% probability of one 25 bps rate hike by the U.S. Federal Reserve by September 2022 compared to a 24% probability a month earlier, according to CME data. Reporting by Saikat Chatterjee; editing by Philippa Fletcher Our Standards: The Thomson Reuters Trust Principles.