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TREASURIES-U.S. yields flat as dismal auction offsets ECB's easy stance

* BOJ keeps rates steady, pushes back inflation target

* Bidding at $13 bln 10-year TIPS sale weakest in nine years

* Jobless claims hit near 5-month low last week

* Philly Fed business index falls to eight-month trough

(Updates throughout, adds quote) NEW YORK, July 20 (Reuters) - U.S. government debt yields were little changed on Thursday as buying tied to the European Central Bank's pledge of easy money stemming from inflation concerns faded after a poor auction of 10-year Treasury Inflation-Protected Securities. Benchmark U.S. yields touched three-week lows in step with their German counterparts as ECB President Mario Draghi sought to reassure markets that the ECB 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 the ECB's policy decision, the Bank of Japan earlier on Thursday kept its rate target unchanged and downgraded its inflation outlook. Concerns over low inflation will likely keep the Federal Reserve from raising U.S. rates at its policy meeting next week, analysts said. Amid the ECB and BOJ's cautious inflation view and last week's disappointing reading on the U.S. consumer price index in June, investors gave a cold shoulder to the latest supply of TIPS, analysts said. "Nobody came. It's hard to get excited about an inflation protection instrument right now," said Tom Simons, money market strategist at Jefferies & Co. in New York. The ratio of bids to $13 billion of 10-year TIPS offered , which is a proxy on auction demand, came in at 1.98, which was the lowest since July 2008, according to Treasury data. In late trading, the benchmark 10-year Treasury yield was down 0.2 basis point at 2.266 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 initially in step with their German yields following the ECB's latest policy statement and Draghi's remarks at his press conference. The 10-year Bund yield bounced in a tight range, down 0.4 basis point at 0.535 percent. Earlier demand for Treasuries was capped 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.

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 in June, the weakest reading in eight months. July 20 Thursday 3:08PM New York / 1908 GMT Price

US T BONDS SEP7 154-3/32 0-5/32 10YR TNotes SEP7 126-16/256 0-4/256 Price Current Net Yield % Change

(bps)

Three-month bills 1.125 1.1438 0.028 Six-month bills 1.0925 1.1138 -0.008 Two-year note 99-204/256 1.3562 0.000 Three-year note 99-246/256 1.5134 -0.006 Five-year note 99-168/256 1.8229 0.002 Seven-year note 99-128/256 2.0776 -0.002 10-year note 100-244/256 2.266 -0.002 30-year bond 103-72/256 2.8361 -0.009

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 24.25 0.50

spread

U.S. 3-year dollar swap 20.25 1.25

spread

U.S. 5-year dollar swap 7.75 0.50

spread

U.S. 10-year dollar swap -3.50 0.50

spread

U.S. 30-year dollar swap -31.00 1.00

spread

(Reporting by Richard Leong)