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TREASURIES-U.S. yields rise on 'risk on' start to the week

NEW YORK, July 18 (Reuters) - U.S. bond yields rose on Monday as upbeat economic data last week and a quiet period from the Federal Reserve set the stage for risk taking as the week began, with stocks adding to Friday's earnings-fueled gains.

U.S. economic data on Friday showed stronger-than-expected retail sales, an uptick in consumer sentiment and lower inflation expectations.

Last week's upbeat inflation data more than offset Monday's news of a plunge in homebuilder sentiment and Friday's data showing manufacturing production slumped for a second straight month in June.

Markets had all but priced in a 100 basis point rate hike during the Fed's upcoming meeting, but the U.S. central bank on Friday signaled a 75 basis point increase that would mirror its June decision.

"As we as we entered into the quiet period, the Fed seems to be leaning more towards 75 basis points than to 100 basis points," said Jim Barnes, director of fixed income at Bryn Mawr Trust.

"The more recent economic data that we got on Friday was more upbeat and today's rising Treasury yields seem to be catching up with the market's activity from Friday as well as the equity market from today."

The S&P 500 was up 0.8% after gaining near 2% on Friday.

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 4.4 basis points at 3.179%.

The yield on 10-year Treasury notes was up 6.7 basis points at 2.997%.

The yield on the 30-year Treasury bond was up 6.4 basis points at 3.159%.

The gap between yields on two- and 10-year Treasury notes , seen as an indicator of economic expectations, was at -18.4 basis points.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.678%, after closing at 2.614% on Friday. (Reporting by Rodrigo Campos; Editing by Richard Chang)

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