(Updates market prices.)

By David Randall

NEW YORK, July 1 (Reuters) - Benchmark 10-year U.S.

Treasury yields rose to their highest levels since late May on

Monday at the start of a holiday-shortened week that will likely

be marked by low trading volumes.

The jump in yields, which move inversely to prices, occurred

a day after the first round of voting in France's national

elections suggested that Marine Le Pen's National Rally (RN)

scored a smaller win than some polls had expected.

At the same time, U.S. President Joe Biden's widely panned

performance in a debate last week may be prompting investors to

price in a greater likelihood that former President Donald Trump

will prevail in the Nov. 5 presidential election, putting extra

pressure on Treasuries, said Thierry Wizman, global forex and

rates strategist at Macquarie Group.

"For a variety of reasons having to do with fiscal policy,

tariff policy, and immigration policy, we do believe that a

prospective Trump administration in 2025-2028 will be more

inflationary than a Biden administration," he said.

The selloff in the longer end of the curve suggested that

the move was not related to concerns about the Federal Reserve's

fight against inflation, but reflected concerns about rising

budget deficits under a second Trump administration, said

Lawrence Gillum, chief fixed income strategist for LPL

Financial.

"There's some election anxiety that's being brought into the

markets with the increase in the odds of Trump winning the

presidency," he said.

The yield on the benchmark U.S. 10-year Treasury note

rose 13.8 basis points to 4.481%. The yield on the

30-year bond rose 14.2 basis points to 4.644%.

Ten-year Treasury yields pulled back briefly following a

reading by the Institute for Supply Management that showed U.S.

manufacturing contracted for a third straight month in June and

a measure of prices paid by factories for inputs dropped to a

six-month low amid weak demand for goods.

The two-year U.S. Treasury yield, which typically

moves in step with interest rate expectations, rose 5.2 basis

points to 4.772%.

The selloff produced a "bear steepener," in which

longer-duration Treasuries lost more ground than those with

shorter durations, leaving the closely watched gap between

yields on two- and 10-year Treasury notes at a

negative 29.3 basis points, its least inverted position since

May.

Trading will close early on Wednesday and the bond market

will be closed on Thursday due to the U.S. Independence Day

holiday.