TREASURIES-US yields lower after data as oil prices ease on Iran deal hopes

* Jobless claims rise above forecasts

* Oil prices fall on hopes for US-Iran deal and Israel-Lebanon ceasefire

* Fed's Lorie Logan says policy may be too loose

By Chuck Mikolajczak

NEW YORK, June 4 (Reuters) - U.S. Treasury yields were lower on Thursday, after labor market data was softer than expected, while oil prices tumbled on renewed optimism a deal to end the war between the U.S. and Iran could be reached. Israel and Lebanon agreed to implement a ceasefire to end hostilities, the Trump administration said on Wednesday, increasing hopes for progress on a broader agreement to end the U.S.-Israeli war on Iran. U.S. crude fell 3.27% to $92.88 a barrel and Brent dropped to $95.12 per barrel, down 2.75% on the day. On the economic front, the Labor Department said weekly initial jobless claims rose 13,000 to a seasonally adjusted 225,000, topping the 213,000 estimate of economists polled by Reuters, although the underlying trend indicated the labor market was on stable footing.

"If we get a deal done, then we'll have a short-run reprieve," said Thomas Urano, co-chief investment officer at Sage Advisory in Austin.

"The background is we know we've got inflation pressure that's still there and pretty constant... and the only other ballast that we've had so far has been the idea of a weak labor market."

The claims data was the latest in a string of reports on the labor market this week, with the key government payrolls report scheduled to be released on Friday.

TEN-YEAR TREASURY YIELD FALLS The yield on the benchmark U.S. 10-year Treasury note fell 4 basis points and was on track for its biggest daily drop since May 26, to 4.451%. Other data from the Labor Department showed worker productivity increased at a downwardly revised 0.3% annualized rate last quarter, the slowest pace since the first quarter of 2025 and shy of the 0.5% estimate.

Unit labor costs increased at a 1.8% rate last quarter, a downward revision from the 2.3% pace reported last month and below the 2.5% forecast. The yield on the 30-year bond declined 2.6 basis points to 4.963%. 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 42.2 basis points. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations for the Federal Reserve, dropped 5.7 basis points to 4.027%. Federal Reserve Bank of Dallas President Lorie Logan said late on Wednesday that she feels monetary policy is currently "neutral or perhaps even a bit loose," and needs to be "at least mildly restrictive" to get inflation down to its 2% target.

After beginning the year pricing in about 50 basis points worth of cuts from the Fed this year, market expectations have shifted and are now pricing in roughly 20 basis points in hikes, according to LSEG data. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.488% after closing at 2.527% on Wednesday, its lowest close in three months. The 10-year TIPS breakeven rate was last at 2.365%, indicating the market sees inflation averaging about 2.4% a year for the next decade.

(Reporting by Chuck Mikolajczak, Editing by Franklin Paul)