* U.S. 7-year note auction shows weak demand
* ECB extends asset buys, weighed on U.S. yields earlier
* Fed chair uncertainty muddles market outlook (Repeats to additional subscribers without any changes to text)
NEW YORK, Oct 26 (Reuters) - U.S. Treasury yields inched higher on Thursday in choppy trading, undermined by a soft auction of U.S. 7-year notes which saw demand at its weakest since August last year.
"We're a little bit lower because the 7-year auction didn't go particularly well," said Lou Brien, market strategist, at DRW Trading in Chicago.
The U.S. 7-year note was sold at 2.280 percent, higher than the expected yield at the bid deadline. The yield was the highest seen at an auction for this debt maturity since January.
There were $66.9 billion bids for a 2.39 bid-to-cover ratio, the lowest since August 2016. The ratio was also well below last month's 2.70 and the 2.56 average. Indirect bidders, which include financial institutions such as foreign central banks, took 63.4 percent, the lowest since May. The indirect takedown was also lower than the previous auction's 70.6 percent and the 69.1 percent average.
The weak seven-year note sale followed similarly soft five-year note and two-year note auctions the previous sessions.
Yields, which move inversely to prices, fell earlier in the session as they tracked the euro zone bond market, after the European Central Bank extended its stimulus program until at least September next year but at a diminished pace.
The ECB said it would cut its bond purchases in half to 30 billion euros a month from January, but hedged its bets by stretching asset buys by nine months given persistently low inflation.
A report from Politico, meanwhile, saying that current Federal Reserve Chair Janet Yellen was out of the running for the top U.S. central bank job briefly nudged rates higher. But a White House official told Reuters: "No final decision has been made."
The other two contenders for the Fed job are Stanford University economist John Taylor, and current Fed Governor Jerome Powell. Both are viewed as more hawkish than Yellen.
"There's no real direction in the market," Brien said. "There's a lot of things that are just being anticipated rather than actually happening, such as the tax plans and speculation about the Fed chair."
In late trading, 10-year U.S. Treasury note yields were at 2.453 percent, up from Wednesday's 2.444 percent. Ten-year yields hit a seven-month peak on Wednesday.
U.S. 30-year bond yields were up at 2.959 percent, from 2.955 percent the previous session. Thirty-year yields had risen to a five-month high on Wednesday.
Following the auction, U.S. 7-year note yields were at 2.296 percent, up from Wednesday's 2.282 percent. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci and Diane Craft)