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TREASURIES-U.S. yields fall as ECB sticks to easy policy stance

* BOJ keeps rates steady, pushes back inflation target

* U.S. to sell 10-year TIPS at 1 p.m. (1700 GMT)

* Jobless claims hit near 5-month low last week

* Philly Fed business index falls to eight-month trough

NEW YORK, July 20 (Reuters) - U.S. Treasury yields declined on Thursday with benchmark yields hitting three-week lows as the European Central Bank maintained its pledge of easy money with inflation stuck below its 2-percent target despite improved growth in the region. ECB President Mario Draghi sought to reassure markets that the central bank was in no rush to pare its monthly asset purchase program amid speculation it might do so later this year. "Inflation is the main concern right now. Until something changes, it will rule the world," said Thomas Roth, head of U.S. Treasury trading at MUFG Securities America in New York. Prior to ECB's policy decision, the Bank of Japan kept its rate target unchanged and downgraded its inflation outlook earlier Thursday. Concerns over low inflation will likely keep the Federal Reserve from raising U.S. rates at its policy meeting next week, analysts said. At 10:10 a.m. (1410 GMT), benchmark 10-year Treasury yield was down 2.0 basis points at 2.248 percent. It touched a three-week low of 2.243 percent, breaking below its 50-day moving average, Reuters data showed. U.S. yields moved in step with their German counterparts following ECB's latest policy statement and Draghi's remarks at his press conference. The 10-year Bund yield bounced in a tight range, last down 1 basis point at 0.529 percent. Demand for Treasuries was mitigated by a hefty supply of corporate bonds, whose issuance has totaled over $43 billion so far this week, according to IFR, a Thomson Reuters unit.

In light of the three major central banks' cautious view on inflation, it was tough to project demand for $13 billion worth of 10-year Treasury Inflation Protected Securities for sale at 1 p.m. (1700 GMT), traders and analysts said. "Demand is going to be tough to gauge if inflation is going to stall here," Roth said. Based on "when-issued" activity, traders expected the new 10-year TIPS issue to fetch a yield of 0.441 percent , compared with 0.420 percent at the prior 10-year TIPS auction in May, according to Tradeweb. On the data front, the Labor Department said first-time filings for jobless benefits fell to 233,000 in the week ended July 15, which was the lowest since February. The Philadelphia Federal Reserve said its barometer on U.S. Mid-Atlantic business activity fell to 19.5 percent in June, the weakest reading in eight months. July 20 Thursday 10:11AM New York / 1411 GMT Price

US T BONDS SEP7 154-19/32 0-21/32 10YR TNotes SEP7 126-48/256 0-36/256 Price Current Net Yield % Change

(bps)

Three-month bills 1.105 1.1235 0.007 Six-month bills 1.1 1.1215 0.000 Two-year note 99-204/256 1.3562 0.000 Three-year note 99-244/256 1.5161 -0.003 Five-year note 99-178/256 1.8146 -0.006 Seven-year note 99-152/256 2.063 -0.017 10-year note 101-32/256 2.2465 -0.021 30-year bond 103-184/256 2.8148 -0.030

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 24.00 0.25

spread

U.S. 3-year dollar swap 19.25 0.25

spread

U.S. 5-year dollar swap 8.00 0.75

spread

U.S. 10-year dollar swap -3.00 1.00

spread

U.S. 30-year dollar swap -30.25 1.75

spread

(Reporting by Richard Leong)