TREASURIES-US yields rise as stronger-than-expected inflation data points to rate-cut pause

Adds details, analyst comment, updates prices

By Gertrude Chavez-Dreyfuss

NEW YORK, Feb 12 (Reuters) - U.S. Treasury yields spiked on Wednesday after inflation in the world's largest economy came in stronger than expected last month, suggesting the Federal Reserve will likely pause its rate-cutting cycle for an extended period.

Data showed the consumer price index (CPI) rose 3% on an annual basis in January compared with the 2.9% increase expected by economists polled by Reuters. On a monthly basis, the index gained 0.5%, exceeding consensus estimates for a 0.3% increase.

"Today's stronger-than-expected CPI release is likely to further cement the FOMC's (Federal Open Market Committee) cautious approach to easing," said Whitney Watson, global co-head and co-chief investment officer of fixed income and liquidity solutions, at Goldman Sachs Asset Management, in emailed comments.

"A resilient labor market also provides scope for patience. We think the Fed is likely to remain in 'wait and see mode' for the time being and anticipate the Fed staying on hold at next month’s meeting."

In early trading, the benchmark 10-year bounced 9.4 basis points to 4.631% US10YT=RR after earlier hitting a roughly three-week high of 4.643%.

At the short end of the curve, the two-year yield, which tracks policy moves by the Fed, gained 7.7 bps to 4.365% US2YT=RR. Earlier in the session, it hit its highest since mid-January of 4.389%.

Following the data, the U.S. rate futures market priced in just 27.5 bps of easing this year, with the first rate reduction now seen at the September Fed policy meeting. Futures traders had for many weeks priced in more than an even chance of easing in June.