TREASURIES-Yields rise as traders wait for fresh economic clues

(Updated to mid-afternoon New York trading)

By Karen Brettell and Tatiana Bautzer

NEW YORK, Nov 21 (Reuters) - U.S. Treasury yields gained on Thursday as traders awaited fresh data that will offer further clues on Federal Reserve policy, after the U.S. government bonds earlier drew a safe-haven bid on news of a Russian missile attack on Ukraine.

Benchmark 10-year Treasury yields are consolidating near more than five month highs as traders wait on jobs and inflation data due in early December for fresh signs of the strength of the U.S. economy.

"The first trading week of December is the next trading week that really can move the needle on the Fed outlook and the macro outlook," said Vail Hartman, U.S. rates strategist at BMO Capital Markets in New York.

Traders have pared bets on how many times the Fed is likely to cut rates as the U.S. economy remains more resilient than previously expected.

Data on Thursday showed that the number of Americans filing new applications for unemployment benefits fell to a

seven-month low

last week, suggesting that job growth likely rebounded in November after abruptly slowing last month amid hurricanes and strikes.

The market is now pricing in a 56% probability the Fed will cut rates by 25 basis points in December, and only a 13% chance that it would be followed by another 25 basis point reduction in January, according to the CME Group's FedWatch Tool.

Treasury yields have also risen over the past two months since investors began betting on President-elect Donald Trump's victory, with Republicans also taking control of Congress. Trump is expected to introduce policies that boost growth, while analysts say immigration reform and tariffs are also likely to increase inflation.

"Markets are watching geopolitics and signs of Trump policies (and) there is no clear trend with very small variations in yields," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York.

Ukraine said Russia fired a new kind of missile at the city of Dnipro on Thursday, and while there was debate over what kind, it appeared to be a nuclear-capable weapon that carried multiple warheads, in a further escalation of the 33-month-old war.

Yields on benchmark U.S. 10-year notes were last up 2.4 basis points at 4.43%. They reached 4.505% on Friday, the highest since May 31.

Two-year yields rose 3.2 basis points to 4.34%. They hit 4.379% on Friday, the highest since July 31.

The yield curve between two-year and 10-year notes flattened slightly to 9 basis points.

The Treasury Department saw soft demand for a $17 billion auction of 10-year Treasury Inflation-Protected Securities on Thursday. The debt sold at a

high yield

of 2.071%, around two basis points above where they traded before the sale.

Demand was 2.35 times the amount of debt on offer, the lowest since May. (Reporting by Tatiana Bautzer; editing by Jonathan Oatis and Nick Zieminski)