(Updates yields; adds analyst comments, graphics)

By Davide Barbuscia

NEW YORK, June 28 (Reuters) - U.S. Treasury yields

reversed earlier declines to trade higher on Friday as

uncertainty around the U.S. presidential election as well as the

imminent French legislative elections offset an earlier

confidence boost from a slowdown in U.S. inflation.

Yields, which move inversely to prices, had declined

after a key inflation reading for May showed price pressures

cooled in line with expectations, strengthening the case for

monetary policy easing to start later this year.

But concerns over the long-term U.S. fiscal and monetary

trajectory became the focus during the day, as President Joe

Biden's shaky performance against Republican rival Donald Trump

in the first 2024 U.S. presidential debate on Thursday increased

speculation about a potential second Trump presidency.

"The debate has relevance because the Trump camp is pro-

growth, pro equity markets, pro higher tariffs, which on the

longer-term augurs for upward pressure on inflation," said

Padhraic Garvey, regional head of research for the Americas at

ING.

Garvey added that while short-term bonds were more

directly impacted by the prospect of interest rate cuts this

year, longer-dated paper reflected ongoing concerns over rising

U.S. debt issuance.

"This is a vulnerability going forward, where we get

data optically positive for the rate-cut narrative but the back

end starts to think about the longer term," said Garvey.

Meanwhile, French government bond yields

rose on Friday

ahead of Sunday's first round of a snap election, which

polls suggest the France's far-right movement could win.

The prospect of "populist politics ... and probably lack

of fiscal restraint" in France may have contributed to the

upward move in U.S. yields, with investors not wanting to take

long positions in bonds into the voting weekend, said John

Velis, Americas macro strategist at BNY.

While political concerns pushed long-term yields higher,

Velis said the move back up in shorter-term yields was likely

driven by the Chicago purchasing managers' index (PMI)

, which came out much stronger than anticipated,

defying the narrative of a sharp economic slowdown.

Earlier in the day the release of personal consumption

expenditures (PCE) price index data had increased the chances of

a Fed rate cut in September, but later on Friday futures

contracts tied to the policy rate implied a 59.5% chance of a

quarter-percentage-point cut in September, unchanged from

Thursday, CME Group data showed.

Benchmark 10-year yields were last at 4.34%,

about five basis points higher than on Thursday. They were 18

basis points lower since the beginning of June and 14 basis

points higher since the start of the second quarter.

Two-year yields were roughly unchanged at

4.72% on Friday. They declined by 17 basis points in June but

added 10 basis points in the second quarter.

Further out, 30-year yields on Friday added

seven basis points to 4.5%, closing the month 15 basis points

lower but adding 17 basis points over the quarter.

The spread between two and 10-year yields

remained deeply negative but narrowed to minus 38 basis points,

its smallest in about a month.

An inversion in that part of the yield curve, which happens

when shorter-dated Treasuries yield more than longer-dated ones,

is closely watched by investors as it has historically signaled

a recession is in the horizon.