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TREASURIES-U.S. 10-year yield hovers at 7-year high before TIPS sale

* Investors, speculators said divided over market's next move

* U.S. to sell $11 bln in older 10-year TIPS issue

* U.S. jobless claims rise, Philly Fed data improve

(Updates trading, adds quote) NEW YORK, May 17 (Reuters) - U.S. 10-year Treasury yields rose on Wednesday, touching a near seven-year peak in a pause of this week's bond market selloff, as traders and investors were divided over whether it was time to buy or if the market was vulnerable to more selling. The U.S. Treasury Department is scheduled to hold a $11 billion reopening of a prior issue of 10-year Treasury Inflation Protection Securities (TIPS) at 1:00 p.m. EDT (1700 GMT). Some traders said solid retail sales data in April released earlier this week spurred speculators to pare their Treasury holdings, but other blamed technical factors on the selloff on moderate trading volume. "It's more a technical move than one driven by fundamentals," said Bruno Braizinha, interest rate strategist at SG Corporate & Investment Banking in York. On balance, recent U.S. economic readings, including payrolls and consumer price data in April, have fallen short of market expectations, Braizinha noted. On Thursday, new applications for U.S. jobless benefits rose more than forecast last week after hitting their lowest level since 1969 in late April. On the other hand, Mid-Atlantic business activity rose to its strongest level in a year, based on an index from the Philadelphia Federal Reserve. At 11:10 a.m. (1510 GMT), the yield on benchmark 10-year Treasury notes was 3.109 percent, up over 1 basis point from late on Wednesday. It touched 3.122 percent earlier Thursday, which was the highest since July 2011, according to Reuters data. Since the 10-year yield on Tuesday broke above 3.05 percent, which was seen as a key technical level, there was no sign yet that asset managers were bailing from their hefty bullish bets on longer-dated Treasuries or that speculators are exiting from their heavy bearish bond positions, analysts said. Technical indicators suggested the Treasuries market is the most oversold since three weeks ago when the 10-year yield rose above 3 percent for the first time since January 2014. Ten-year Treasuries are attractive at current yield levels and will be more compelling if their yield climbs to 3.25 percent, Braizinha said. The Treasuries market's risks are "symmetric," meaning yields could move in either direction, he said. If the 10-year yield hits 3.25 percent, "it's a definite buy." May 17 Thursday 11:12AM EDT/ 1512 GMT Price

US T BONDS JUN8 140-17/32 -0-13/32 10YR TNotes JUN8 118-124/256 -0-16/256 Price Current Net Yield % Change

(bps)

Three-month bills 1.8775 1.9126 0.008 Six-month bills 2.04 2.0898 0.005 Two-year note 99-160/256 2.5729 -0.016 Three-year note 99-162/256 2.7537 -0.005 Five-year note 99-38/256 2.9359 0.002 Seven-year note 98-208/256 3.0658 0.008 10-year note 98 3.1094 0.014 30-year bond 97-204/256 3.2404 0.025

DOLLAR SWAP SPREADS

Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 24.25 1.25

spread

U.S. 3-year dollar swap 18.00 0.75

spread

U.S. 5-year dollar swap 9.75 0.50

spread

U.S. 10-year dollar swap 3.00 -0.25

spread

U.S. 30-year dollar swap -8.25 -0.75

spread

(Reporting by Richard Leong; Editing by Bernadette Baum)