TREASURIES-US yields lower after initial jobless claims data

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Initial jobless claims decrease less than expected

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CPI data due on Friday

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Logan, Miran set to speak on Thursday

By Chuck Mikolajczak

NEW YORK, Feb 12 (Reuters) - U.S. Treasury yields were lower on Thursday, in the wake of data on the labor market that showed new applications for unemployment benefits decreased ?less than expected last week. Yields briefly pared declines after the Labor ?Department said initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 227,000, above the 222,000 estimate of economists polled by Reuters, ?before quickly reversing course. Bond yields had risen on Wednesday after a stronger-than-expected jobs report dented market expectations that ?the Federal Reserve might have the leeway to cut interest rates in ?the near-term, with the ?2-year note registering its biggest daily jump since late October.

"There was a bit of a freak out in the bond market," said Jay ?Hatfield, CEO and CIO of Infrastructure Capital Advisors ?in New York.

"The bull case on the Fed cutting was pretty much centered around the weak employment picture, so that case was challenged. That was an overreaction, the economy is ?growing, but it's not by any means a ?more normal 3% ?growth, and so now we're sort of just back to where we were." The yield on the benchmark U.S. 10-year Treasury note fell 3.1 basis points to 4.152% and is on ?track for its fifth drop in the past six sessions. The market focus will shift to inflation ?data in the form of the consumer price index (CPI), set to be released on Friday, to gauge the path of interest rates from the Federal Reserve. The yield on the 30-year bond fell 3.3 basis points to 4.781%.

More supply will come to the market on Thursday when the Treasury will auction $25 billion in 30-year ?bonds.

A closely ?watched part of the U.S. Treasury yield curve measuring the gap between ?yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 65.5 ?basis points.

Expectations the central bank could have the leeway to cut interest rates had been creeping higher until Wednesday's jobs report, and the market is not pricing in more than a 50% chance for a cut of at least 25 basis points until the Fed's June meeting, according to CME's FedWatch Tool

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, fell 1.7 basis points to 3.495%.

Fed officials scheduled to ?speak on Thursday include Bank of Dallas President Lorie Logan and Governor Stephen Miran.

The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.497% after closing at 2.502% on February 11.

The 10-year TIPS breakeven ?rate was last at 2.32%, indicating the market ?sees inflation averaging about 2.3% a year for the next decade.

(Reporting by ?Chuck Mikolajczak, Editing by Franklin Paul)