* Dow & S&P climb to new highs, banks rally * Fed buys $3.31 bln in longer-dated Treasuries * Producer, consumer price indices due later in week By Ellen Freilich NEW YORK, May 14 (Reuters) - Prices of U.S. Treasuries fell on Tuesday, lifting benchmark yields to seven week highs as investors instead directed money into riskier assets such as stocks. Key U.S. stock indexes rose to new highs, lead by large-cap bank stocks, damping demand for safe-haven U.S. debt. "It's all about equities," said Dimitri Delis, interest-rate strategist at BMO Capital Markets in Chicago. The attitude among investors is "let's go buy risky assets, the Fed has our back." Prices of 10-year notes slid 12/32 to yield 1.97 percent, up from 1.91 percent late on Monday. Prices of 30-year bonds fell 1 point to yield 3.19 percent, from 3.12 percent late on Monday. Michael Lorizio, senior fixed-income trader at Boston-based John Hancock Asset Management, said it was "somewhat surprising" that yields had reached those levels "because 1.85 percent on the 10-year yield and 3.05 percent on 30-year yields both seemed like spots where we would see significant buying interest." With the U.S. Federal Reserve engaged in a massive easing program, at least for now, some investors are looking for higher returns than they can get in the safe-haven U.S. Treasury market. Thus, cash they might have put to work in bonds is going into stocks. But a "great rotation" of money from bonds directly into stocks is less discernible, analysts said, and money going into stocks is more likely to be coming from cash on the sidelines. "There is still $2.6 trillion sitting in money market mutual funds which is very elevated," noted Wesley Sparks, head of U.S. fixed income at Schroder Investment Management in New York. Speculation has swirled recently about when the Fed could slow or even stop its $85 billion per month buying of Treasuries and mortgage-backed securities. But with inflation still well below the Fed's 2 percent target and the economy sluggish, some argued that monetary policymakers have little incentive to slow down yet. "We have inflation going to 1 percent by this summer," said John Briggs, a Treasuries strategist with RBS in Stamford, Connecticut. With the Fed on track to miss its 2 percent target, as measured by the PCE, the Fed's preferred personal consumption expenditures price index, by a full percentage point, "we're supposed to ... think of them slowing the pace of accommodation? It just doesn't make sense," Briggs said. Analysts forecast U.S. growth could remain lackluster for perhaps years. Mohamed El-Erian, chief executive of bond manager Pimco, said Pimco sees growth in the 2 percent area for the next three to five years. "If you look at the larger picture you would have to feel confident that we would remain in this established range on yields, or a touch higher. We haven't seen a dramatic change in the macro economic picture; global growth is below trend," said John Hancock's Lorizio. Still, because the market is so focused on the economy, an upside surprise (in growth or inflation) could be a catalyst for bonds to sell off some more, he said. More inflation figures are slated for later in the week, as well, and those could underscore the lack of price pressures in the economy. With data showing U.S. import prices fell in April, "we expect that the decline in oil and gasoline prices will lead to declines in the headline PPI data tomorrow, (and) in the headline CPI on Thursday," said Thomas Simons, money market economist at Jefferies & Co in New York. As part of its asset purchases, the Fed on Tuesday bought $3.31 billion in Treasuries maturing between May 2020 and February 2023. On the other end of the sovereign debt spectrum, ratings agency Fitch upgraded its sovereign credit rating for Greece by one notch on Tuesday, citing the country's progress in cutting its budget deficit and the receding risk of its euro zone exit.