May 9 (Reuters) - Benchmark Treasury yields edged higher

on Thursday, following a brief dip after data showed the number

of Americans filing new claims for unemployment benefits

increased more than expected last week.

Initial claims for state unemployment benefits increased

22,000 to a seasonally adjusted 231,000 for the week. Economists

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

week.

"If you just read it on the surface, it looks like one of

the uglier numbers that we've seen in the last several months,"

said Thomas Simons, a money market economist at Jefferies in New

York, but "volatility around the first of the month is not

unusual."

Some said the rise last week was likely related to seasonal

issues, with school spring breaks out of the way.

Traders are focused on data for fresh clues on when the U.S.

Federal Reserve is likely to begin cutting interest rates.

Yields fell to one-month lows on Friday after jobs data for

April was below economists' expectations. That came after the

Fed on Wednesday said it still expects a rate cut to be its next

move even as inflation remains stubbornly above its 2% annual

target.

San Francisco Fed President Mary Daly may offer new insight

into the Fed's thinking when she speaks later on Thursday.

Traders are pricing in the probability of two 25 basis point

cuts this year, with the first expected in September, but any

cuts will likely depend on whether inflation can resume its

easing trend.

That will make next week's consumer price inflation report

for April a key focus.

Benchmark 10-year note yields were last up 1

basis points at 4.496%, after earlier falling to 4.477%.

Two-year yields, which typically move in step

with interest rate expectations, fell 2 basis points to 4.822%.

The inversion in the yield curve between two-year and

10-year yields narrowed 2 basis points to minus

33 basis points.

The Treasury will sell $25 billion in 30-year bonds on

Thursday, the final sale of $125 billion in coupon-bearing

supply this week.

The government saw good demand for a $42 billion auction of

10-year notes on Wednesday and a $58 billion sale of three-year

notes on Tuesday.