TREASURIES-U.S. bonds recover after China denies reductions

(Adds auction results, quote; updates prices)

* China disputes bond holding report

* ECB indicates may change policy message

* Treasury sees strong demand for 30-year bonds

NEW YORK, Jan 11 - Treasury yields fell on Thursday after China disputed a report that its government officials had recommended the country slow or halt its purchases of U.S. bonds.

China is diversifying its foreign exchange reserves in order to safeguard their value, the country's currency regulator said on Thursday, while dismissing a media report about its purchases of U.S. debt.

A Bloomberg News story published Wednesday lifted yields on the 10-year government bond to a 10-month high as investors worried about large buyers reducing their participation in the market.

The bond moves suggest that the market is very jittery about potential sources of demand," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

Benchmark 10-year notes gained 6/32 in price to yield 2.53 percent, after rising as high as 2.597 on Wednesday, the highest since March 15.

Hawkish European Central Bank meeting minutes helped bring yields off their lows on Thursday. The ECB said it should revisit its policy message in early 2018 and gradually adjust its language to reflect improved growth prospects.

Nervousness about reduced central bank accommodation has put pressure on bonds since the Bank of Japan said on Tuesday it will trim its purchases of Japanese government bonds.

The back up in yields nonetheless helped draw buyers to the Treasury Departments $12 billion auction of 30-year bonds, the final sale of $56 billion in coupon-bearing supply this week.

It was a very good auction, said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. Typically (for long-dated debt) if you see a decent amount of a sell-off you tend to see buyers coming in, and thats exactly what you saw in todays auction.

Indirect bidders, which includes fund managers, insurance companies and other bidders, took a record share of 71.49 percent of the sale while dealers took a record low, at 21.23 percent.

The bonds sold at yields that were more than 2 basis points lower than where they had traded before the sale.

Investors are next focused on Friday's consumer price data for December. Novembers core inflation report disappointed investors by unexpectedly slowing.

Data on Thursday showed U.S. producer prices fell for the first time in nearly 1-1/2 years in December amid declining costs for services. (Editing by Nick Zieminski and Tom Brown) )