TREASURIES -US front-end yields rise sharply?as Fed cuts priced out

* Fed rate cut view trimmed amid global central bank decisions

* BoE, ECB decisions highlight inflation risks from conflict

* US yield curve flattens as short-term rates rise faster

(Recasts, adds new comment, New York dateline, byline, updates yields)

By Gertrude Chavez-Dreyfuss, Amanda Cooper and Rae Wee

NEW YORK/LONDON/SINGAPORE, March 19 (Reuters) - U.S. Treasury yields jumped at the front end of the curve on Thursday, as caution stemming from decisions by the Bank of England and the European Central Bank - against the backdrop of the Middle East conflict - spilled into the world's largest bond market.

The moves prompted investors to price out expectations for Federal Reserve interest rate cuts this year, based on LSEG estimates. U.S. rate futures pointed to just 7 basis points (bps) of easing from the Fed this year, way down from the 21 bps of easing seen late on Wednesday. There was also no rate cut priced for the first half of 2027.

The U.S. central bank, in its forecast released on Wednesday following its two-day policy meeting, has pencilled in a rate cut of 25 basis points later this year and another in 2027. The two-year yield US2YT=RR, which is typically most responsive to changes in expectations for inflation and interest rates, hit 3.96%, its highest since August 2025 , and was last up 11.9 bps to 3.866%. The five-year yield US5YT=RR also climbed to a seven-month peak and was last up 6.8 bps at 3.929%. On the longer end of the curve, the benchmark 10-year yield US10YT=RR rose 2.2 bps to 4.279%, after earlier hitting its highest since late August.

BRITAIN AND EUROZONE KEEP RATES ON HOLD

Analysts said the rise in Treasury yields accelerated after the Bank of England's Monetary Policy Committee voted unanimously to keep borrowing costs unchanged, citing inflation risks linked to the conflict. Some policymakers even raised the prospect of further rate increases.

At the same time, the European Central Bank held its key interest rate steady and warned that the war in Iran was clouding the outlook for growth and inflation in the euro zone.

The BoE and ECB decisions "reminded Treasury investors that, as much as the Fed was signaling patience yesterday, it's really possible that central banks could prioritize inflation over everything else in this type of supply-shock scenario," said Will Compernolle, macro strategist, at FHN Financial in Chicago.

Fed Chair Jerome Powell said the environment was subject to unusually high uncertainty as policymakers take stock of the impact of the war on Iran. The Fed held interest rates steady on Wednesday in the 3.50%-3.75% target range and projected higher inflation, as well as steady unemployment.

Attacks on's South Pars gas field, on the world's largest gas plant in Qatar and on oil refineries in both Saudi Arabia and Kuwait sent Brent prices shooting to $115 a barrel. They were last up 3.6% at $111.15.

U.S. crude futures were up 1.2% at $97.44 per barrel .

Inflation swaps, a gauge of the outlook for future consumer prices, spiked to a six-month peak of roughly 3.3% in one-year maturities. This suggested that investors believe that the consumer price index will average more than 3% over the next 12 months, higher than the 2.4% year-on-year CPI reading for February.

In other corners of the bond market, the U.S. yield curve flattened for a fourth consecutive session, with the spread between two-year and 10-year yields narrowing to 36.4 bps from 48.6 bps late on Wednesday.

The curve showed a bear-flattening pattern, with short-term interest rates rising faster than longer-dated ones, reflecting a rethink of the Fed's easing path. Rising oil prices have rekindled inflation worries, leading traders to scale back expectations for swift or deep rate cuts.

Earlier in the session, U.S. data pointed to labor market resilience and improving manufacturing activity in the U.S. Northeast, which overall supported the view that the Fed can afford to be patient before restarting its rate-cutting cycle.

Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 205,000 for the week ended March 14, data showed. Economists polled by Reuters had expected 215,000 claims for the latest week.

The Philadelphia Fed business conditions index for March also showed a solid reading of 18, higher than the forecast level of 10. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama)