* U.S. 5/30 yield curve steepens, unwinding flattening bets * Fed funds futures show 60% chance of hike in June * U.S. 5-year breakeven rate hits highest since January 2004 (Adds analyst comments, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, Oct 25 (Reuters) - U.S. Treasury yields slipped on Monday in choppy trading, weighed down by market uncertainty about when the Federal Reserve would tighten monetary policy in the face of persistently high inflation. The U.S. yield curve resumed steepening as investors continued to unwind curve flattening bets, which suggested a looming rate hike by the Fed. The spread between U.S. 5-year notes and 30-year bonds widened to 91.4 basis points on Monday, from 87.2 basis points late Friday. Fed funds futures on Monday showed a more than 60% chance of a 25 basis-point rate tightening in June next year, fully pricing that scenario in September. Futures traders also priced in two rate hikes before the end of 2022. "Fully pricing a rate hike in September is too aggressive for me since that would be just three months after tapering," said Gennadiy Goldberg, senior rates strategist at TD Securities. The Fed had said it wants to reduce asset purchases next month and end in June. "We still look at the first rate hike well into 2023. Of course, that all depends on the economic outlook and our economic outlook is moderation in growth and inflation over the next 12 months. That doesn"t require the Fed to effectively hike rates," Goldberg added. Fed Chair Jerome Powell on Friday said while he thinks it is time to withdraw stimulus from the market, the Fed can be patient with raising rates and allow the labor market to heal. . In afternoon U.S. trading, the benchmark U.S. 10-year yield fell nearly two basis points to 1.6369%. Last week, the 10-year yield hit 1.705%, the highest since mid-May. The U.S. 5-year yield, which reflects Fed tightening, was last down 3.3 basis points at 1.1777%. It has been trending upward in the last few weeks, touching its highest since February 2020 at 1.193% last week. U.S. 30-year yields, on the other hand, were slightly higher at 2.0919%. U.S. yields have come off early highs, with market participants saying short-covering spurred the Treasury rally that caused rates to dip. In other parts of the fixed income sector, the U.S. 5-year inflation breakeven rate, which reflects inflation expectations over the next five years, rose to 2.954%, the highest since at least January 2004. "To truly fight inflation, the Fed will need to increase its policy rates," said Lon Erickson, portfolio manager at Thornburg Investment Management in Sante Fe, New Mexico. "Despite consistent Fed rhetoric around policy rate liftoff well after tapering, when the economy reaches full employment, we"ve started to see the market price in earlier policy rate moves, perhaps losing confidence in the "transitory" nature of inflation," Erickson added. This week, the market is bracing for $183 billion in Treasury supply of 2-year, 5-year, and 10-year notes. October 25 Monday 3:33PM New York / 1933 GMT Price Current Net Yield % Change (bps) Three-month bills 0.055 0.0558 -0.005 Six-month bills 0.0625 0.0634 -0.003 Two-year note 99-162/256 0.4414 -0.023 Three-year note 99-160/256 0.7529 -0.032 Five-year note 98-142/256 1.1777 -0.033 Seven-year note 98-144/256 1.4689 -0.026 10-year note 96-126/256 1.6387 -0.016 20-year bond 94-220/256 2.0676 -0.003 30-year bond 97-248/256 2.0919 0.001 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 17.25 0.00 spread U.S. 3-year dollar swap 16.00 0.25 spread U.S. 5-year dollar swap 8.75 1.25 spread U.S. 10-year dollar swap 2.75 1.75 spread U.S. 30-year dollar swap -20.25 1.25 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Richard Chang and Will Dunham)