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TREASURIES-Prices slip after Fed Chair Yellen cautious on labor

NEW YORK, Aug 22 (Reuters) - U.S. Treasury prices slid modestly on Friday with investors caught between the cautious message over labor markets from Fed Chair Janet Yellen and geopolitical risks from Ukraine crisis that is hampering euro zone economic growth.

Yellen, in the keynote speech at the annual central banker jamboree in Jackson Hole, Wyoming said the U.S. labor markets remain hampered in their recovery from the Great Recession and therefore need to move with caution on when to raise interest rates even as the economic data shows improvements.

Her dovish stance contrasts with some voices within the U.S. Federal Reserve's monetary policy committee who say the Fed risks waiting too long to increase interest rates to stem inflation or the creation of asset bubbles.

"I think we are splitting hairs. We cannot say she's changed sides and I don't think the market was really expecting that. I think the market was setting itself up for a more clearly dovish speech and we didn't get that," said Wilmer Stith, co-manager of the Wilmington Broad Market Bond fund, in Baltimore, Maryland.

Benchmark 10-year U.S. Treasuries slipped 5/32 of a point in price to yield 2.42 percent.

"I think everyone knows Yellen is a dove, and that she would rather err on the side of caution. I agree with her. Investors are really in a sweet spot, the economy is improving and central banks are not going to let the global economy fall into another recession. Yellen is going to lead the way on that," said Wayne Kaufman, chief market analyst at Phoenix Financial Services in New York.

Impacting the longer-end of the U.S. Treasury curve are the geopolitical risks most acute along the Russian-Ukrainian border, where a convoy of Russian aid trucks, only some of which had their cargo checked, crossed the border without proper clearance.

Ukrainian officials described the movement an invasion and the European Union called it a clear violation of the Ukrainian border.

Western sanctions imposed on Russia and Moscow's retaliation are expected to negatively impact euro zone growth, which ground to a halt in the second quarter as Germany's economy shrank and France's stagnated.

"If European growth slows, it will force the ECB to take out the big guns similar to the U.S. quantitative easing and that is having a cascading effect and impacting the long end of the U.S. Treasury curve," said Wilmington's Stith.

German Bund yields fell close to a record low below 1 percent on Friday, after the convoy crossed the border. Falling European yields are putting the 30-year U.S. Treasury in a more favorable light. It is up 3/32 of a point in price, yielding 3.18 percent.

European Central Bank President Mario Draghi will also address the labor market in a Jackson Hole speech at 2:30 p.m. EDT (1830 GMT)

(Additional reporting by Ryan Vlastelica Editing by W Simon)