NEW YORK, Aug 8 (Reuters) - U.S. Treasury yields rose on

Thursday after data showed jobless claims were lower than

expected in the latest week, boosting confidence that the U.S.

economy is less likely to face an imminent recession.

"This is a very positive print for markets overall. It

reinforces the fact that labor market momentum is not slowing to

the same extent that was represented by the payroll report, and

it also reinforces the absence of very significant layoffs in

the economy," said Gennadiy Goldberg, head of U.S. rates

strategy at TD Securities in New York.

Initial claims for state unemployment benefits fell 17,000

to a seasonally adjusted 233,000 for the week ended Aug. 3, the

largest drop in about 11 months. Economists polled by Reuters

had forecast 240,000 claims for the latest week.

Yields had tumbled after Friday's employment report for July

showed an unexpected increase in the unemployment rate, while

jobs gains also came in below economists' forecasts. Tumbling

stock markets partly blamed by traders unwinding popular

dollar/yen carry trades added to demand for safe haven U.S.

debt.

But yields have rebounded as investors bet that the fears

about the economy were overdone and on optimism that most of the

unwind of the carry traders has been completed.

Thursday's data may lead to further yield increases.

What the data "confirms is that we're seeing the

unemployment rate rise due to new entrants into the labor force

rather than a very large amount of layoffs," Goldberg said. "I

suspect that in the absence of data to the contrary, we'll

continue to see the pricing for September rate cuts decline, and

yields move higher across the curve."

The odds of the Federal Reserve cutting interest rates by 50

basis points at its next policy meeting on Sept. 17-18 fell to

57%, from 69% on Wednesday, with a 25 basis point cut seen as

having a 43% probability, according to the CME Group's FedWatch

Tool.

Yields on interest rate sensitive two-year notes

were last up 7.4 basis points at 4.075%. They fell to 3.654% on

Monday, the lowest since April 2023.

Benchmark 10-year note yields rose 3.8 basis

points to 4.005%, after reaching 3.667% on Monday, the lowest

since June 2023.

The yield curve between two- and 10-year Treasury notes

flattened 5 basis points to minus 7 basis points.

It reached 1.50 basis points on Monday, turning positive for the

first time since July 2022.

The next major U.S. economic release will be consumer price

inflation for July on Aug. 14. Comments by Fed Chair Jerome

Powell at the Fed's Jackson Hole Economic Policy Symposium on

Aug. 22-24 may also provide new clues on the path of rate cuts.

The Treasury Department will sell $25 billion in 30-year

bonds on Thursday, following a weak reception for a $42 billion

sale of 10-year notes on Wednesday where investors appeared to

balk at the lower yields following the recent bond rally.

The government saw solid demand for a $58 billion sale of

three-year notes on Tuesday.