TREASURIES-U.S. bond yields rise on Yellen, inflation data

* April core price rise revives bets on Fed rate hike

* Fed's Yellen sees rate liftoff in 2015 if economy improves

* Lack of Greek debt deal underpins safety bids for bonds

* U.S. bond market to close early ahead of 3-day weekend

(Adds quote, updates market action)

By Richard Leong

NEW YORK, May 22 (Reuters) - U.S. Treasuries yields rose on

Friday as a stronger-than-expected increase in core consumer

prices in April revived expectations that inflation may approach

the Federal Reserve's 2 percent target later this year.

If the price upturn persists, it would allow the U.S.

central bank to consider ending its near-zero interest rate

policy this year sooner than previously thought, analysts said.

"The core CPI (Other OTC: CPICQ - news) number is starting to point to some momentum

toward inflation. If it continues, they will be ready to move

later on this year," said Todd Hedtke, vice president of

investment management with Allianz Investment Management in

Minneapolis.

Fed Chair Janet Yellen, in a speech to a business group in

Providence, Rhode Island, said a rate increase would be

appropriate this year if the economy shows further improvement.

Bond yields briefly spiked but retreated as traders focused on

the rest of Yellen's remarks that signaled a path of rate hikes

will be gradual.

The government's gauge on core consumer goods prices, which

excludes volatile energy and food prices, rose by 0.3 percent

last month, bringing the year-over-year rise to 1.8 percent, the

highest since October.

The rise in Treasuries yields was capped by a perception the

April core price increase was largely driven by a 0.7 percent

jump in medical care expenses, which is not expected to happen

again, while some other components of the core number were

unchanged to weaker.

In addition, the absence of a deal between Greece and its

lenders stoked worries of a default by the cash-strapped nation,

driving a safety bid for low-risk U.S. government debt.

A Greek government spokesman said on Friday that Greece

still expects to clinch a cash-for-reform deal in time to meet

its debt payments in June.

The U.S. bond market closed early at 2 p.m. (1800 GMT) and

will be shut on Monday for the U.S. Memorial Day holiday.

On light trading volume, benchmark 10-year Treasuries

were down 7/32 in price, yielding 2.213 percent, up

3 basis points from Thursday's close.

The two-year Treasuries yield, which is sensitive

to change in traders' view on changes in Fed policy, climbed 4

basis points to 0.618 percent.

Two-year and 10-year yields were up 8 and 7 basis points on

the week, respectively.

In the inflation debt market, the yield spread between

10-year Treasury inflation protected securities

and regular 10-year Treasuries touched 1.92

percent, the widest in 2-1/2 weeks. This gauge of investors'

inflation expectations was last 1.90 percent, up 2 basis points,

according to Tradeweb.

(Editing by Bernadette Baum and Leslie Adler)