TREASURIES-Bonds set for worst month since 2013 on hawkish Fed view

* Treasuries set for weakest month since May 2013

* Yields fall on week after Yellen testimony

* Month-end buying pushes yields lower on day (New (KOSDAQ: 160550.KQ - news) throughout, updates prices, adds comments)

By Sam Forgione

NEW YORK, Feb 27 (Reuters) - U.S. Treasuries appeared on track on Friday for their biggest monthly loss since May 2013 after strength in U.S. economic data over the month boosted expectations the Federal Reserve would take a less dovish stance on monetary policy.

Expectations that the Fed could hike rates by mid-year rose this month after a strong U.S. employment report for January and stronger core consumer prices data. A rebound in oil prices and a deal to extend Greece's bailout program also took the shine off safe-haven Treasuries.

U.S. government securities have posted a combined loss of 1.6 percent in February through Thursday, according to Barclays (Hanover: BCY.HA - news) data, the biggest decline since May 2013. The sell-off marked a turnaround from January, when Treasuries posted their best monthly return since August 2011.

"Growth isn't spectacular, but it's still very robust, and this completely and conclusively will support a Fed reaching normalization," said Edward Acton, Treasury strategist at RBS (LSE: RBS.L - news) Securities in Stamford, Connecticut.

Expectations for a less-dovish Fed dominated even as many investors interpreted testimony from Fed Chair Janet Yellen this week as giving the central bank more flexibility to hike rates later. That interpretation led Treasuries yields to slip this week for the first time in four weeks.

Also contrary to the view of a mid-year rate hike, New York Fed President William Dudley said Friday that raising interest rates too late is safer than acting too early.

Yields fell slightly on the day on month-end portfolio readjustments heading into the close of U.S. markets.

"We are seeing some of the typical month-end rebalancing," said Boris Rjavinski, an interest rate strategist at UBS (LSE: 0QNR.L - news) in New York. He said that given underperformance in bonds and outperformance in stocks this month, one would expect large investors to buy some bonds and sell stocks to rebalance.

Treasuries prices were whipsawed early in the session after a downward revision to U.S. fourth-quarter GDP growth and a weak U.S. Chicago Purchasing Management index reading for February clashed with a stronger-than-expected reading on U.S. consumer sentiment.

U.S. 30-year Treasuries prices were last up 4/32 in price to yield 2.60 percent, from 2.61 percent late Thursday. Benchmark 10-year notes were last up 4/32 to yield 2 percent, down from 2.01 percent late Thursday.

Three-year Treasury notes were last up 2/32 to yield 1 percent, from 1.03 percent late Thursday.

(Reporting by Sam Forgione; additional reporting by Richard Leong; Editing by Dan Grebler)