By Matt Tracy
       Aug 3 (Reuters) - U.S. long-term Treasury yields hit
nine-month highs on Thursday after employment and other economic
data pointed to easing inflation, maintaining their high levels
in the afternoon.
    The benchmark U.S. 10-year yields were last up
11.3 basis points (bps) at 4.191%, after initially hitting
4.195%, the highest since November. 
    The 30-year bond yield was last up at 14.3 bps
to 4.308%, while the 20-year Treasury bond's yield
was at 4.494%. Both yields touched their highest since November
as well.
    A deluge of Treasury supply lies in part behind the rise in
yields. On Wednesday, the Treasury Department announced a $103
million offering to refinance roughly $84 billion in Treasury
notes and bonds due on Aug. 15. 
    "When you obviously have a lot of supply, then at that point
you're going to be seeing the price of these bonds drop and
yields move higher," said Bernard Baumohl, chief global
economist at The Economic Outlook Group in Princeton, New
Jersey.
    The Treasury Department plans to auction $42 billion in
three-year notes on Aug. 8, $38 billion in 10-year
notes on Aug. 9 and $23 billion in 30-year bonds on Aug. 10. 
    Baumohl noted his expectation that, in particular, the
10-year Treasury's yield has neared or reached its peak, and
will hover around the 3.6%-4.0% range for the remainder of the
year, based on the assumption that inflation will continue its
retreat.
    Higher yields on Thursday also reflect increasingly positive
market sentiment for a resilient economy with high interest
rates.
    
    PRIVATE SECTOR
    U.S. data released Thursday showed layoffs dropped to an
11-month low in July, even as the number of Americans filing new
claims for unemployment benefits rose slightly last week and the
labor market remains tight. 
    The figures followed Wednesday's ADP National Employment
Report, which showed 324,000 private sector jobs added in July
and a 6.2% rise year-over-year in annual private sector pay.
    Also on Thursday, the Labor Department released data showing
U.S. worker productivity rebounded sharply in the second
quarter, further boosting the inflation outlook. 
    The data reassured investors, but was not a definitive
indicator of whether the U.S. Federal Reserve would pause or
hike rates one more time this year, after its 25-basis point
hike in the federal funds target rate in July.
    "The market is still pricing in a 30% hike by the November
(FOMC) meeting," said Subadra Rajappa, head of U.S. rates
strategy at Société Générale in New York.
    Shorter-term yields edged lower following the data. The
two-year yield, which is more closely linked with
monetary policy expectations, was last at 4.895%.
    As a result, the yield curve between two-year and 10-year
Treasuries, a key measure of recession sentiment,
narrowed its inversion further to minus 69.6 bps - the tightest
spread in two months. It last stood at minus 70.50 bps,
continuing its steepening trend over the last three sessions. 
    Despite the improved market sentiment, billionaire investor
William Ackman said on Wednesday his hedge fund Pershing Square
Capital Management had bet against 30-year Treasury bonds. He
cited higher defense costs, energy transition and greater worker
bargaining power as factors fueling further inflation.
    U.S. yields have ascended after Fitch downgraded the U.S.
government's credit rating to AA+ from AAA on Tuesday, citing an
expected fiscal deterioration over the next three years and a
snowballing general debt burden.
    After Wednesday's Treasury refunding announcement, Assistant
Secretary for Financial Markets Josh Frost said the credit
downgrade "doesn't change what Americans, investors and people
around the world already know, which is that Treasury securities
remain the world's pre-eminent safe and liquid asset and that
the American economy is fundamentally strong."
    Investors will closely watch the July non-farm payrolls
report on Friday and the July consumer price index report next
week for inflation trends.
    
    August 3 Thursday 3:16PM New York / 1916 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             5.2725       5.4171    -0.008
 Six-month bills               5.2575       5.4903    -0.009
 Two-year note                 99-186/256   4.8956    0.005
 Three-year note               99-194/256   4.5879    0.029
 Five-year note                99-54/256    4.3023    0.061
 Seven-year note               98-112/256   4.2608    0.089
 10-year note                  93-128/256   4.1914    0.113
 30-year bond                  88-152/256   4.3082    0.143
 

 (Reporting by Matt Tracy; Editing by Nick Macfie, Richard Chang
and Alison Williams)