NEW YORK, Dec 5 (Reuters) - U.S. Treasury yields were

higher on Thursday morning as investors digested slightly higher

jobless claims data ahead of the more significant nonfarm

payrolls data expected on Friday.

The yield on the benchmark U.S. 10-year Treasury note

rose 2.9 basis points to 4.211%. The two-year

U.S. Treasury yield, which typically moves in step

with interest rate expectations, rose 5.6 basis points to

4.177%.

The 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,

flattened to 3.2 basis points. The number of Americans

filing new applications for unemployment benefits increased

moderately last week, suggesting the labor market continued to

steadily cool. Initial claims for state unemployment benefits

rose 9,000 to a seasonally adjusted 224,000 for the week ended

Nov. 30, the Labor Department said on Thursday. Economists

polled by Reuters had forecast 215,000 claims for the latest

week.

"Jobless claims were much ado about nothing; even with the

9,000 bump in the most recent filing week, claims remain at a

very low level. Meanwhile, continuing claims remain elevated,

showing the slow firing and hiring trend in the U.S. labor

market," said Jason Ware, chief investment officer and chief

economist at Albion Financial Group in Salt Lake City.

Markets are now shifting focus to more relevant data about

the job market and inflation scheduled to be released ahead of

the Dec. 17-18 Federal Reserve meeting, said Mike Lorizio,

senior fixed income trader at Manulife Investment Management in

Boston.

"Between now and the meeting, there's so much economic data,

the payrolls on Friday, CPI and PPI next week, markets will look

at the numbers as crucial to (the) Fed's decision," he said.

Fed Chair Jerome Powell appeared to signal on Wednesday

support for a slower pace of rate cuts ahead, when he said the

economy was stronger at this point than the central bank had

expected in September. San Francisco Fed President Mary Daly

added there was "no sense of urgency" on reducing borrowing

costs further.

But markets still see high odds of a 25-basis point rate cut

in this month's meeting. CME's FedWatch tool on Thursday showed

a 73.8% chance of a December rate cut, slightly lower than the

75% chance late on Wednesday.

Comments from Richmond Fed President Thomas Barkin are due

later in the day.

The breakeven rate on five-year U.S. Treasury

Inflation-Protected Securities (TIPS) was last at

2.386% after closing at 2.383% on Dec. 4. The 10-year TIPS

breakeven rate was last at 2.291%, indicating

the market sees inflation averaging about 2.3% a year for the

next decade.