March 14 (Reuters) - U.S. Treasury yields climbed on

Thursday following hotter-than-expected February inflation data,

raising uncertainty about whether the Federal Reserve would cut

rates later than June, as widely expected.

The producer price index rose 0.6% in February, exceeding

forecasts of 0.3% and the previous month's increase. This

follows Tuesday's surprisingly solid increase in the consumer

price index for February.

Still, the data only slightly dented speculation in the

futures markets that the Fed would ease in June for the first

time since it began hiking the Fed funds rate from near-zero in

March 2022.

No Fed policymakers are scheduled to speak this week ahead

of the central bank's March 19-20 meeting, where it is expected

to hold rates in the 5.25%-5.5% range until mid-June, with at

least two more rate cuts likely by year-end. They are looking

for data that gives them more confidence inflation is on a path

to their 2% goal.

The benchmark 10-year note yield was last up 7.1

basis points (bps) at 4.265%, rising for the fourth consecutive

day. Two-year yields were up 5.3 bps on the day at

4.677%.

Traders in Fed funds futures reduced bets that the Fed will

cut rates by June to 62.5%, from 66.7% on Wednesday, according

to the CME Group's FedWatch tool.

"This data really pushes back on the market pricing,"

said Subadra Rajappa, head of U.S. rates strategy at Societe

Generale.

"If you look at the market pricing of cuts, June really

feels like a coin toss as opposed to a shoo-in now like it was

over the last couple of weeks."

In addition to February's PPI data, initial jobless claims

for the week ending March 9 also came in stronger than expected.

There were 209,000 claims on the week, lower than the 218,000

expected.

Retail sales disappointed in February, meanwhile, ticking up

0.6% month over month versus an expected 0.8% increase.

"The one observation that we'll add is the pace of retail

sales during Q1 hints of the specter of stagflation - although

it's only a couple prints and insufficient to draw any

broad-based conclusion," said Ian Lyngen, managing director and

head of U.S. rates strategy for BMO Capital Markets, in a note.

"The kneejerk response to the data was bond-bearish but the

price action has faded and the theme of unchanged and quiet

trading has reemerged."

The inversion in the yield curve between two-year and

10-year notes narrowed to minus 40.7 bps from

minus 43.4 bps on Wednesday.

The U.S. Treasury on Thursday is slated to auction $95

billion in four-week bills and $90 billion in eight-week bills.

The auctions follow a $22 billion auction of 30-year bonds

on Wednesday, which drew a high yield of 4.331% and

a bid-to-cover ratio of 2.47. This was slightly higher than the

February average of 2.40 and the 2.39 average for the last 10

auctions of 30-year bonds.

The 30-year bond yield was last up eight bps to 4.426% from

4.346% on Wednesday.