NEW YORK, Sept 26 (Reuters) - U.S. Treasury yields rose

on Thursday after data showed that jobless claims unexpectedly

fell in the latest week, leading traders to cut bets that the

Federal Reserve will make another 50-basis point cut at its

November meeting.

Initial claims for state unemployment benefits dropped 4,000

to a seasonally adjusted 218,000 for the week ended Sept. 21.

Economists polled by Reuters had forecast 225,000 claims for the

latest week.

Claims "fell versus the expected increase," said Zachary

Griffiths, senior investment grade strategist at CreditSights in

Charlotte. "There's a lot of focus on the labor market in terms

of what the Fed is going to do next, so it's not so surprising

to see the market reacting there."

Other data on Thursday showed that U.S. economic growth

accelerated in the second quarter amid strength in consumer

spending.

Interest rate sensitive two-year yields were last

up 2.7 basis points on the day at 3.580%. Benchmark 10-year

yields fell 0.2 basis points on the day to 3.779%,

but were higher than before the data was released.

The yield curve between two- and 10-year notes

flattened three basis points to 20 basis points.

The Fed is expected to prioritize the health of the labor

market in its decisionmaking in the coming months as inflation

recedes closer to its 2% annual target. A resurgence in price

pressures, however, could disrupt the U.S. central bank's

expected path of rate reductions.

Traders are now pricing in a 56% probability that the Fed

will cut rates by 50 basis points at the conclusion of its Nov.

6-7 meeting, down from 63% before the data, according to the CME

Group's FedWatch Tool.

The Fed last week kicked off an anticipated series of

interest rate cuts with a larger-than-usual

half-percentage-point reduction that Fed Chair Jerome Powell

said was meant to show policymakers' commitment to sustaining a

low unemployment rate now that inflation has eased.

Traders are still pricing in aggressive rate cuts going

forward, with another 76 basis points of cuts expected by

year-end, and 196 basis points in reductions by the end of 2025.

"The market is still and has been priced for more than the

Fed suggests it will deliver, even in that 'dot plot' that was

updated just a week ago. So when we think about the balance of

risk to yields, we see them as more skewed to the upside as it

seems tough for the Fed to potentially deliver as much as the

market is expecting," said Griffiths.

Fed policymakers said last week they expect another 50 basis

points in cuts this year.

Yields fell on Tuesday and odds of a larger rate cut in

November rose after data showed that U.S. consumer confidence

dropped by the most in three years in September amid mounting

fears over the labor market.

This week's main U.S. economic focus will be the Personal

Consumption Expenditures index for August on Friday.

The Treasury will sell $44 billion in seven-year notes on

Thursday, the final sale of $183 billion in coupon-bearing

supply this week.

It saw solid demand for a $70 billion sale of five-year

notes on Wednesday and a $69 billion auction of two-year notes

on Tuesday.