TREASURIES-Yields rise as stocks gain, data signals economic growth

(Updates prices)

* Yields rise from 1-1/2-month lows

* U.S. retail sales data points to stronger economy

* Fed buys $1.02 billion bonds due 2036-2044

* Inflation, manufacturing data in focus this week

By Karen Brettell

NEW YORK (Frankfurt: HX6.F - news) , April 14 (Reuters) - U.S. Treasuries yields rose

on Monday as stocks gained and better-than-expected retail sales

data boosted expectations that economic growth is picking up

after months of weakness blamed in part on bad weather.

Investors are focused on a busy week of data releases for

signs on the strength of the economy as the Federal Reserve

pares its bond purchases and look toward interest rate hikes

that most expect to begin next year.

Yields hit session highs on Monday after U.S. retail sales

recorded their largest gain in 1-1/2 years in March. Retail

signs account for a third of consumer spending.

The data showed that growth is recovering from

weather-related weakness, said Ian Lyngen, an interest rate

strategist at CRT Capital in Greenwich, Connecticut. "It gave a

boost to stocks and weighed on Treasuries," he said.

Benchmark 10-year notes were last down 5/32 in

price to yield 2.64 percent, after dropping to a 1-1/2-month low

of 2.60 percent in overnight trading.

Economic data releases including consumer price inflation on

Tuesday and several manufacturing surveys will be in focus for

further signs of economic strength this week. Fed Chair Janet

Yellen is due to speak on Tuesday at a markets conference and on

Wednesday at an economic event.

Inflation has been running below the Fed's 2 percent target,

which may make it difficult for the U.S. central bank to

increase benchmark interest rates if price pressures don't

increase, as many Fed officials say they continue to expect.

"So far the mantra from the Fed is that it will improve

'soon'. I think at some point that 'soon' will run out," said

Aaron Kohli, an interest rate strategist at BNP Paribas (Milan: BNP.MI - news) in New

York. "It's a huge problem for the Fed."

U.S. inflation-linked bonds have been among the worst

performers since the Fed last year indicated that it would begin

tapering its bond purchases, with investors worrying over what

catalyst will lead inflation higher.

Demand for the debt will be tested this week when the

Treasury on Thursday sells $18 billion in five-year Treasury

inflation-protected securities (TIPS).

The sale will come before an early market close on Thursday

and the closure of the bond market the following day for the

Good Friday holiday.

The Fed bought $1.02 billion in bonds due between 2036 and

2044 on Monday as part of its ongoing purchases. It will

purchase between $1.75 billion and $2.25 billion in notes due

2020 and 2021 on Tuesday.

Rising stock markets also reduced demand for Treasuries on

Monday.

Treasuries yields had dropped on safety buying last week

after investors nervous over the valuations of some companies

fled stocks and sought out lower-risk investments.

But that buying ebbed in U.S. trading on Monday, with

earnings from Citigroup (NYSE: C - news) helping sentiment after the bank

posted better-than-expected quarterly income as losses on

troubled assets narrowed.

Overnight buying sparked by tensions in Ukraine also helped

bonds rally before the U.S. session began.

Ukraine's president threatened military action after

pro-Russian separatists occupying government buildings in the

east ignored an ultimatum to leave and another group of rebels

attacked a police headquarters in the region.

(Editing by James Dalgleish and Leslie Adler)