(Adds new comments, details, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, June 27 (Reuters) - U.S. Treasury yields came

off session highs on Friday, but remained marginally up on the

day, after data showed consumer spending declined unexpectedly

in May even though inflation remained tepid, as markets started

pricing in a quicker pace of Federal Reserve easing this year.

U.S. 10-year yields were last little changed at 4.257%

, compared with 4.269% before the data. On the front

end of the curve, two-year yields were at 3.739%, up

2.5 basis points, from 3.754% just before.

Friday's data showed U.S. consumer spending unexpectedly

fell in May, dipping 0.1% last month after an unrevised 0.2%

gain in April, as the boost from the pre-emptive buying of goods

like motor vehicles ahead of tariffs eased. According to Action

Economics, this is the first decline in spending since September

2021.

U.S. personal income also fell 0.4% last month.

"For the moment, there is nothing of consequence to worry

about on the inflation side of this report. There is, however,

an unexpected drop in consumer spending, the first since the

pandemic," Carl Weinberg, chief economist at High Frequency

Economics, said in emailed comments.

"That is something to think about. The Fed will make note of

this report."

Following the data, traders in rate futures on Friday added

to bets the Fed will lower short-term borrowing costs by 75

basis points in 2025, most likely starting in September.

Fed funds futures priced in about 65 bps of rate cuts in

2025.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Jane

Merriman and Emelia Sithole-Matarise)